PART II DAMAGES

A. Concept
FRANCISCO L. LAZATIN, plaintiff-appellant, vs. ANGEL C. TWAO and GREGORIO T.
CASTRO, defendants-appellees.; PAREDES, J.:
FACTS:
Angel C. Twao and Gregorio T. Castro filed for the recovery of P35,000 plus interest
against F. L. Lazatin, et al. for their purchase from the U.S. government of 225 auto-trucks.
CFI: dismissed the complaint as well as intervention
CA: reversed - Twao and Castro are co-owners in the business of buying and selling surplus
auto-trucks, and ordered the Lazatin to pay P10K so it was levied on his properties and was
subsequently sold at the public auction where Twao and Castro were the purchasers
Before the expiration of the redemption period, Lazatin deposited the redemption price
Lazatin filed to recover from Twao and Castro the balance of P19,676.09 representing the
proceeds of auto-trucks sold directly to the purchasers by Twao and Castro. Pets.
also secured a writ of attachment alleging that there was no security whatsoever for the
payment claimed in the complaint and that they are removing or are about to remove or
dispose of their property with intent to defraud their creditors and that the sheriff refused to
deliver the amount deposited
Lower court granted the Urgent Motion to Dissolve the Writ of Preliminary Attachment and
dissolved the writ
May 9, 1953: Lazatin died.
March 10, 1954: Gil Gotiangco was appointed and qualified as administrator of plaintiff's estate
RTC: Estate of Lazatin to pay:
(1) P3,000.00 for the fees of Attorney Manuel O. Chan;
(2) P,500.00 for moral damages to each of the defendants;
(3) Six percent (6%) interest on the amount of P13,849.88 from August 6, 1952 until said
amount is actually delivered to and receipted by the defendants; and
(4) To pay the costs.
Judgment is also rendered against the Central Surety and Insurance Co., which is solidarily liable
with the Estate of the deceased plaintiff Francisco L. Lazatin on its bond for the sum of P20,000.00,
filed by said Company for the issuance on the writ of attachment for the amounts mentioned in Nos.
(2) and (3) of the dispositive part of this decision.
CA: affirmed
ISSUE: W/N Lazatin is liable for the damages
HELD: YES.
Affirmed with modification: elimination of moral damages
The law on damages is found on Title XVII of the Civil Code (Arts. 2195 to 2235). The rules governing
damages laid down in other laws, and the principles of the general law on damages are adopted in so
far as they are not in consistent with the Code (Arts. 2196 and 2198). Article 2197 mentions the kind
of damages recoverable, among which are (1) actual or compensatory and (2) moral Article 2219
provides that moral damages may be recovered in the following and analogous cases . . . (3)
malicious prosecution. There is an abundance of case holding that the action to recover damages
from the attachment plaintiff, for the wrongful issuance and levy of an attachment (malicious
attachment) is identical or is analogous to the ordinary action for malicious prosecution

ON MORAL DAMAGES
Based on jurisprudence: It may logically be inferred that in order that moral damages may be
recovered in connection with the writ of attachment under consideration, malice is an essential
ingredient thereof-> Here, the court did not make any finding that the said petition was maliciously
sued out therefore not entitled to moral damages
Note: Defendants invoked Sec. 4 of Rule 59 of the ROC, mainly pointing out that all damages must
be paid
SEC. 4. Bond required from plaintiff. The party applying for the order must give a bond executed to
the defendant in amount to be fixed by the judge, not exceeding the plaintiff claim that the plaintiff will
pay all the costs which it may be adjudged to the defendant and all damages which he may sustain by
reason of the attachment, if the court shall finally adjudge that the plaintiff was not entitled thereto.
The SC disagreed. It explained that: Sec. 4 of Rule 59, does not prescribe the remedies available to
the attachment defendant in case of a wrongful attachment, but merely provides an action for
recovery upon the bond, based on the undertaking therein made and not upon the ability arising from
a tortious act, like the malicious suing of an attachment. Under the first, where malice is not essential,
the attachment defendant, is entitled to recover only the actual damages sustained by him by reason
of the attachment. Under the second, where the attachment is maliciously sued out, the damages
recoverable may include a compensation for every injury to his credit, business or feelings. It also
reiterated that that the ROC is older than the CC so its rules should be encompassed in the CC. ->
"all damages", refers to the damages resulting from the undertaking itself, the recovery of which is
subject to "the principles of the general law on damages"
ON OTHER FEES:
In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs,
cannot be covered, except:
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff.
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses
of litigation should be recovered." (Art. 2208, Civil Code).
This case is based on (4). Here, there was no showing in the decision appealed from that plaintiffs'
action is "clearly unfounded". Yes, yes Plaintiffs-appellants' complaint was not dismissed because
the facts alleged therein were found untrue, but on purely technical grounds; the special defenses of
prescription of the action and res adjudicata. While it may appear also that the move was a scheme to
prevent the defendants-appellees from reaping the benefits of the final judgment rendered in their
favor in said case, still one cannot nullify, without cause, the good and honest motive, which should
be presumed, when a litigant goes to court for the determination of his alleged right.
Considering the fact that defendants-appellees were drawn into this litigation by plaintiff-appellant and
were compelled to hire an attorney to protect and defend them, and taking into account the work done
by said attorney, as reflected in the record, throughout the proceedings, SC deemed it just and
equitable to award at attorney's fees for defendants-appellees
It appears that plaintiffs-appellants have abandoned their appeal with respect to the payment of 6%
interest in the amount of P13,849.88.
HEIRS OF SIMEON BORLADO, namely, ADELAIDA BORLADO, LORETO BORLADO,
REYNALDO BORLADO, RICARDO BORLADO, FRANCISCO BORLADO and ALADINO
DORADO, petitioners,

vs. COURT OF APPEALS, and SALVACION VDA. DE BULAN, BIENVENIDO BULAN, JR.,
NORMA B. CLARITO and THE PROVINCIAL SHERIFF OF CAPIZ, respondents.
GR 114118 ; 28 Aug 2001 ; J. Pardo
Facts: P Borlados and R Bulans are fighting over a parcel of land in Capiz. P Borlados claim to have
a right over the property by virtue of them being the heirs of the original owner of said lot, Serapio
Borlado.
R Bulans, on the other hand, trace their title to a Deed of Sale between Serapio Borlado and Bacero
dated 15 April 1942. When Bacero died, his widow sold the same lot to the R Bulans in 1954. Bulans
were in actual peaceful possession of the lot up to 1972.
It was in 1972 that the R Bulans possession was interrupted, when the Ps entered said lot and
occupied it. Hence, the R Bulans filed an ejectment suit against the Ps at the MTC. The MTC ruled in
favor of the Bulans. Instead of appealing, the P Borlados filed another case for recovery of
possession of said lot before the RTC.
RTC rendered a decision in favor of R Bulans, declaring them as the owners of said lot. As a form of
damages, the RTC judge declared the P Borlados solidarily liable to defendants the quantity of one
hundred (100) cavans of palay every year from 1972 (when P Borlados unlawfully withheld the
property from the R Bulans) until plaintiffs vacate the premises of the land in question
Issue: WON the award of damages in the form of delivery of palay was proper
Held: No
Ratio: As a matter of law, the RTC and CA erred in holding P Borlados liable to pay R Bulans one
hundred (100) cavans of palay every year from 1972 until they vacate the premises of the land in
question. The one hundred cavans of palay was awarded as a form of damages. We cannot sustain
such award. Palay is not legal tender currency in the Philippines.
PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROMEO DIANOS, accused-appellant.
FACTS: In this case, Romeo Dianos was charged with five separate informations for MURDER,
ATTEMPTED MURDER and FRUSTRATED MURDER. At his arraignment, accused Dianos entered a
plea of not guilty to all the charges. His co-accused remained at large.
STORY: Nancy Ortiz Dasudas (Nancy) saw the accused throw a hand grenade near the house of her
parents. Josie, who was standing near the site of the explosion was hit. Later that day, the accused,
was seen traversing the Cypress Point Road. Following closely behind was his passenger jeepney
with three unidentified men on board. Teresita, together with her husband, Virgilio Ortiz (Virgilio), her
daughter, Corazon Ortiz Ihanda (Corazon), her brother, Ricardo Pablo (Ricardo), and her son, Zaldy
Ortiz (Zaldy), were on the terrace of their new house waiting for the other Ortiz children to arrive in
time for the New Year's eve celebration. Ricardo met the accused near the waiting shed. Without any
warning, the latter suddenly struck Ricardo on the face with the butt of an armalite causing him to fall
to the ground. The accused then fired at Ricardo, hitting him on the chest and left arm. The accused
then directed his armalite at Virgilio. The latter was hit on the buttocks. The accused thereupon fired
indiscriminately at the house of Zaldy. Zaldy received a bullet injury in his right thigh, while his
daughter, Lizette Ortiz (Lizette), was hit in her abdomen and wrist. The accused moved towards the
direction of the new house and fired at the terrace. Teresita took a bullet wound on the neck from the
volley of shots, while Corazon escaped unscathed. The accused, right after the shooting, boarded his
jeep and sped towards Baguio City.
In the aftermath, two were found dead, namely, Teresita and Ricardo, while three others, Virgilio,

Zaldy and Lizette, sustained injuries. The latter were all rushed to the Baguio General Hospital where
they were treated for gunshot wounds.
Virgilio testified that he had spent P1,000 for medications for his thigh injury. A riprap contractor, he
was not able to work for seven months depriving him of his monthly income of P2,000 for the period
or the total amount of P14,000. He asserted that he had incurred P110,000.00 for funeral services for
his wife Teresita. Nenita Pablo (Nenita) said in her testimony that she had spent P15,000.00 for the
autopsy and coffin of Ricardo, P3,000.00, by way of doctor's fee and P8,000.00 for the wake. Zaldy
testified that he had spent P500 for the treatment of his injury.
RTC: Accused guilty beyond reasonable doubt of the crimes with which he was charged and to
indemnify the heirs of deceased Ricardo Pablo the sum of P50,000.00 for his death and the sum
of P23,000.00 as Actual Damages for expenses incurred for the wake, funeral and burial services,
both indemnifications being without subsidiary imprisonment in case of insolvency and to pay the
costs.
ISSUE: WON DAMAGES WAS AWARDED CORRECTLY BY THE RTC- Modified
HELD: Anent the actual damages, the uncorroborated testimonies of private complainants cannot
suffice. Such damages to be recoverable must not only be capable of proof but must actually be
proved with reasonable degree of certainty.
In Fuentes, Jr. vs. Court of Appeals: In crimes and quasi-delicts, the defendant is liable for all
damages which are the natural and probable consequences of the act or omission complained of. To
seek recovery for actual damages it is essential that the injured party proves the actual amount of
loss with reasonable degree of certainty premised upon competent proof and on the best evidence
available. Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact
and amount of damages.
There is, however, no doubt that injury was sustained by private complainants due to appellant's
actions. In the absence of competent proof on the specific amounts of actual damages suffered,
private complainants are entitled to nominal damages. The Court deems the amounts of P15,000.00
in Criminal Case Nos. 8524-R and 8528-R, P10,000.00 in Criminal Case No. 8527-R, and P5,000.00
in Criminal Case Nos. 8525-R and 8526-R to be reasonable given the circumstances.
Finally, in accordance with prevailing jurisprudence relative to Article 2206 of the Civil Code, the
award of P50,000.00 indemnity for each of the death of Teresita Ortiz and Ricardo Pablo must be
affirmed. Moral damages, in addition to the awards made by the trial court in favor of the injured
victims, are also recoverable under paragraph (3) of Article 2206, in relation to Article 2217 and
paragraph (1) of Article 2219, of the Civil Code, which the Court hereby fixes at P30,000.00 for each
of the two deceased victims payable to their respective heirs.
On this score, the Court finds it opportune to clarify certain notions dealing on the recovery of these
various damages.
There is a significant distinction, in the context of Book IV, Title XVIII, of the Civil Code on "Damages,"
between the terms "damages" and "damage." Damages refer to the sum of money which the law
awards or imposes as pecuniary compensation, recompense, or satisfaction for an injury done or a
wrong sustained as a consequence of either a breach of a contractual obligation or a tortuous or
illegal act, while damage pertains to the actionable loss, hurt or harm which results from the unlawful
act, omission or negligence of another.[24] In fine, damages are the amounts recoverable or that
which can be awarded for the damage done or sustained.

An award of actual or compensatory damages requires actual proof of pecuniary loss. An exception
from the rule, pursuant to Article 2206 of the Civil Code, are "damages for death caused by a crime or
quasi-delict" which can be awarded forthwith to the heirs of the victim by proof alone of such fact of
death. No proof of pecuniary loss is likewise necessary in order that moral, nominal, temperate,
liquidated or exemplary damages may be adjudicated,[25] and it is quite enough that proof of damage
or injury is adduced. Being incapable of exact pecuniary estimation, the assessment of such
damages, except for liquidated damages which the parties themselves fix, is left to the sound
discretion of the court.
Akin to, but not exactly in the same category as actual or compensatory damages, is the civil
indemnity ex delicto particularly so referred to in paragraph 3 of Article 104, in relation to Article 100,
of the Revised Penal Code as "indemnification for consequential damages."[26] These two species of
damages differ basically in that civil indemnity ex delicto can be awarded without need of further proof
than the fact of commission of the felony itself while actual or compensatory damages to be
recoverable must additionally be established with reasonable degree of certainty (except, as
aforesaid, in the case of the indemnity for death under Article 2206[27] of the Civil Code). In fine, the
first species merely requires proof of damage or injury (similar to that needed in an award of moral
damages) to be recoverable; the second kind requires, in addition, proof of damages or pecuniary
loss in order to warrant recovery.
WHEREFORE, the assailed decision is AFFIRMED with modifications in that the actual damages
awarded to Virgilio Ortiz, Nenita Pablo and Zaldy Ortiz are deleted and in lieu thereof nominal
damages in the following amounts are hereby awarded: P15,000.00 in Criminal Case No. 8524-R
and No. 8528-R; P10,000.00 in Criminal Case No. 8527-R; and P5,000.00 in Criminal Case No.
8525-R and No. 8526-R. Moral damages in the amount of P30,000.00 are also hereby awarded to
the heirs of each of the two deceased victims.
B. Actual or Compensatory Damages
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation
only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to
as actual or compensatory damages.
1. Requisites
I. Alleged and proved with certainty
SCOTT CONSULTANTS & RESOURCE DEVELOPMENT CORP VS CA (1995)
FACTS:
Plaintiff is a corporation organized under Philippine laws. It entered into an Option Agreement for a
12-month period with Lourdes Yaneza, a representative of Kadakilaan Estate, owner of a mining
claim which was registered with the Office of the Mining Recorder of the DENR to develop, operate,
mine and market the products and also to exploit properties under government laws and regulations
and under the terms and conditions of the Option Agreement.
Plaintiff and Juana Santos, a duly authorized representative of San Mateo Mines Exploration
(SMMEI), an entity that has the possession and beneficial use of the mining claim, entered into an
agreement granting the plaintiff exclusive and irrevocable right to do all and any of the acts mentioned
in the Agreement. The said agreement was registered with the Mines and Geosciences Sector,
DENR.
Defendant used to hold an operating agreement with the SMMEI, a holder of an Industrial Permit No.

40 and Commercial Permit No. 968 for a 5-year period.

After some time, SMMEI notified the defendant of the termination of their operating agreement for the
reasons states in the letter. But defendants prevented plaintiff from gaining access, occupying,
exploring and developing the existing mining claims and despite a cease and desist order and a letter
from Bureau of Mines, defendants prevented plaintiff access to its legitimate area of activity.
Defendants denied the allegations and averred that the Puray Plant was constructed on the land of
Eligio Bautista, who had a lease contract with Philrock. The site where the defendants performs
extraction process of retrum materials from the aggregate products is located 500m from the nearest
national road the land to be traversed from the national road to the plant site and from the latter to
the extraction site, are privately owned. The acquisition of easement rights from the owners of the
land in favor of the defendant, the latter constructed access routes which is exclusive and before any
3rd party make use of these routs, they must first secure written permission from the defendants.
Court granted the Motion for Leave to File 3rd Party Complaint and the Motion for Intervention and
admitted the 3rd Party Complaint filed by the defendant Philrock against the SMMEI and the
Complaint in Intervention filed by the land owners. Philrock averred that the latter and the 3rd party
defendant, SMMEI entered into an agreement where Philrock shall extract gravel and sand materials
for 5 years and that SMMEI sent a letter unilaterally terminating the agreement. SMMEI then entered
into a substantially the same agreement with the plaintiff for a higher consideration and that Philrock
suffered damages.
Intervenors alleged that they have a legal interest in the matter since the mining claims being
asserted by the plaintiff are located in their private property and that the plaintiff had been using the
same without the permission of the intervenors as owners. However, plaintiff alleged that it obtained a
written permission from the land owners on whose property exploration is currently conducted.
TC ruled that since plaintiff is the lessee of the 2 registered mining locators, Kadakilaan Estate and
the SMMEI by virtue of the 2 contracts entered into by the plaintiff, it is important to look at the
contracts to determine the rights the plaintiff may have acquired. It ruled that the special law being
cited by the Mines and Geo-Sciences Bureau is PD 1281, creating the Bureau of Mines. Said decree
grants the Bureau of Mines the ORIGINAL AND EXCLUSIVE JURIS to hear and decide cases
involving a mining property subject of different agreements. Hence, all parties are bound by the
directive of the said Bureau. The remedy of plaintiff is to seek a reconsideration of the directive before
the Bureau. If denied, plaintiff may still enforce the warranty stipulated in its agreement against
SMMEI. A party cannot unilaterally terminate a contract without justifiable case. SMMEI's basis for
unilaterally terminating the contract is the one-sidedness and partiality of said agreement BUT SUCH
IS NT A JUSTIFIABLE CAUSE!! A party's unilateral termination without legal justification makes it
liable for damages suffered as per NCC 1170!!!
As regards the other contract (Kadakilaan), since the contract stipulated that such right shall be for a
period of 12 months counted from the date of this agreement, it sets a pre-condition on plaintiff- the
delivery of a WRITTEN NOTICE to exercise the option within the 12 mo period before it may be
given the exclusive right to develop and mine the minerals found. And in this case, the pre-condition
has never been met by the plaintiff. Option period expired already without plaintiff exercising its
option.
Since the agreement is clear that it did not vest on plaintiff the right to make use of these access
routes, as these are not owned not built by Kadakilaan nor by SMMEI, the remedy afforded to the
plaintiff is to file the Eminent Domain to compel defendants to allow it to make use of the access
routes and after payment of just compensation. Or to just build their own after entering into
arrangements with the landowners.

TC ruled that defendant's claim for actual damages must be granted! No doubt that the defendant
sustained pecuniary loss due to the acts of the plaintiff, including the filing of this complaint. And
because of the filing of this complaint, it was shown that Philrock was ridiculed by the public. So TC
granted actual, moral, and exemplary damages. (But as SC pointed out, they just said this without
any legal ground or basis, wala sinabi lang nila. Inaward lang nila)
CA affirmed the decision of the TC as to the actual damages but not the award of moral damages
which it deleted on the ground that the testimonies of the witnesses did not prove that private
respondent's good reputation was besmirched. (CA naman used testimonies but SC said di naman
enough)
ISSUE:
1) WON Philrock is not liable for damages because it did not illegally prevent petitioner from
using the access roads YES
2) WON Petitioner is liable for damages NO
HELD:
1) Petitioner was unable to prove its right to use private respondent's access routes.
2) Just as in the case of moral damages, SC ruled that there was no credible poof of actual
damages. The TC made no specific finding on the extent thereof. They just said it in the
disposition. CA used testimonies of Ayson which cites Prespondent's non-full operation bec
Presp was unable to extract aggregates from its own area due to the fence constructed by
petitioner. Si San Juan naman said that attention, diverted to the entering of Scott
Consulatants to our area and lack of sleep and anxiety bec of public ridicule. How the award
of P800k was arrived at was NEVER SHOWN. It remains a speculation. CC 2199 provides that
one is entitled to adequate compensation ONLY FOR SUCH PECUNIARY LOSS SUFFERED
BY HIM AS IS DULY PROVED.
Both decisions do not justify the award of P50k exemplary damages. CC 2229, exemplary or
corrective damages are imposed by way of example of correction for the public good, in addition to
moral, temperate, liquidated or compensatory damages. CC 2234 provides that:
Art. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show
that he is entitled to moral, temperate or compensatory damages before the court may consider the
question of whether or not exemplary damages should be awarded. In case liquidated damages have
been agreed upon, although no proof of loss is necessary in order that such liquidated damages may
be recovered, nevertheless, before the court may consider the question of granting exemplary in
addition to the liquidated damages, the plaintiff must show that he would be entitled to moral,
temperate or compensatory damages were it not for the stipulation for liquidated damages.
SC ruled that there is no legal basis for the award of exemplary damages since the Presp was not
entitled to moral, temperate, or compensatory damages and there was no agreement on stipulated
damages.
No atty's fee (P50k) too. Since CC 2208 says that in the absence of stipulation, there can be no
recovery of atty's fees and expenses of litigation other than judicial costs except in the instances
enumerated. The closest instance is Art 2208 (11) which provides for such recover where the court
deems it just and equitable. But in the body of the TC, theres no statement that it would be just and
equitable eh.
The award of atty's fees is the exception rather than the rule and counsel's fees are not to be

awarded every time a party wins a suit. Court may award atty's fees under CC2208 but needs factual,
legal and equitable justification; its basis cannot be left to speculation or conjecture. If granted, Court
must explicitly state in the body of the decision and not only in the dispositive portion, the legal reason
for the award of atty's fees.
For lack of factual and legal bases, no atty's fees!
WHEREFORE, the instant petition is partly GRANTED and the awards of actual damages, exemplary
damages, and attorney's fees in the challenged decision are DELETED. In all other respects, the
challenged decision is AFFIRMED.
Basilan Lumber Co vs Cagayan Timber Expert Co
FACTS
The plaintiff Basilan Lumber Company entered into a contract with the defendant Cagayan Timber
Export Company, whereby the latter agreed to deliver to the former 1,200,000 board feet of
exportable logs not later than May 31, 1951. This contract is dated April 25, 1951. Subsequently, in an
agreement dated July 3, 1951, the logs to be delivered were reduced to 500,000 board feet and the
delivery thereof was to be made not later than July 15, 1951. But in another agreement of August 22,
1951, the contract was again amended, increasing the amount to be delivered to 740,000 board feet
of logs to be delivered on or about September 1,1951. In this contract, it was further agreed that a
minimum of 50,000 board feet per gang per hatch per weather working day would be loaded.
The plaintiff sold the logs to a Japanese buyer, who had entered into a contract with the plaintiff
through the East Asiatic Company, which acted as intermediary. The logs were to be loaded on the
"Kanatsu Maru" which was chartered by the Japanese buyer and which arrived in the Philippines on
September 9, 1951, at the place agreed upon for loading. It stayed in port for a total of 8 days, but
was able to load only 483,672 board feet supplied by defendant.
There were four hatches in the vessel, hence the loading was to have lasted two and a half days,
more or less. However, it actually took 7 days to load because no sufficient logs were available at the
place where the loading was to take place and because of the poor stevedoring service. Hence the
demurrage amounted, as per decision of the Court of First Instance, to $4,141.16. As to dead freight,
which corresponds to the freight of the logs which were not delivered shipside, the same amounted to
$5,673.43. So, the total amount of demurrage and dead freight is $9,814.59, or P19,629.18.
CFI: Defendant liable for P19,629.18 as demurrage and dead freight charges + legal interest +
attorney's fees.
CA: CFI reversed. The damages in question (demurrage and dead freight charges) are yet to be
suffered and are not actual, but they may fall under the general category of prospective damages
which in this jurisdiction are not actionable yet since the rule is that no recovery of damages can be
had without satisfactory proof of the real existence of such damages.
ISSUE:
W/N In an action for breach of contract of sale of logs, caused by the failure of the supplier to furnish
the agreed quantity, as a result of which the exporter of the logs became liable for demurrage and
dead freight, may the exporter be allowed to recover the amount of demurrage and dead freight even
if the same has not been actually paid for by the exporter
HELD:
NO. CA affirmed.
No award for speculative damages

Article 2199 of the Civil Code of the Philippines to the effect that damages must be "duly proved
denies the grant of speculative damages, damages not actually proved to have existed and to have
been caused to the party claiming the same.
In the case at bar the evidence shows that actual damage was caused to the agent through which
petitioner sold the logs to a Japanese buyer, as said agent had already paid the same to the latter.
However, there is no proof that respondent had already paid the agent said damages, or that it had
already been required to pay the same, and while these have not happened the damage to the
petitioner may not, under the above-cited article of the Civil Code, be deemed to have actually been
caused to him.
No express stipulation for liability in case of breach
It is also argued that the contract between the plaintiff and the defendant contains the following terms:
In case of non-compliance by the SELLER with the amended contract conditions, the SELLER hereby
agrees to indemnify the BUYER for whatever damages the BUYER would be held liable to their
buyers in Japan as a Consequence thereof, . . . (Exhibit "O").
All other terms and conditions enumerated in the original agreement of April 21, 1951, and
amendments thereto dated June 18th and July 3rd 1951, remain unchanged." (Exhibit "D").
. . . any claims arising out of default or failure of the SELLER to comply with loading capacity of the
vessel shall be for account of the SELLER. (Exhibit "F") (See Petitioner's brief, page 11.)
from which, the intention of the parties to make the seller liable to plaintiff for the valid claims of
Japanese buyers, is evident.
Court ruled however that the same are merely declaratory of the obligation assumed, not an
obligation which the obligee may demand in compliance with upon breach of the terms of the contract
and even before actual payment of damages by the one who breached the agreement, because the
obligee has not yet actually suffered the damage or paid the same to the person to whom damage
was caused. It is only when the obligee actually suffers the damage, that compliance, with the
obligation may be demanded.
MCC INDUSTRIAL SALES CORPORATION, petitioner, vs. SSANGYONG CORPORATION,
respondents.
G.R. No. 170633 || October 17, 2007 || NACHURA, J.:
FACTS: (super concise na po nito haha)
P is engaged in the business of importing and wholesaling stainless steel products. One of its
suppliers is R, whose head office is in Seoul, SK. Their business correspondences involve telephone
calls, fax, etc. The process would be that R would send the pro forma invoices containing the details
of the steel product to P; if P conforms, its representatives would send it back with their signature to
R.
The crux (LOL) of this controversy is with regard to an order made by Ps Manager, Gregory Chan
(also President of Seiko Stainless Steel Corp.) of 220 metric tons (MT) of hot rolled stainless steel,
the order having been accepted by both parties according to the process above. The pro forma
invoice provided that the order would be paid through an irrevocable letter of credit (L/C) in favor of R.
After the opening of which, delivery of the products would be made. Because of Ps order, R also
placed an order with POSCO, its steel manufacturer, and has also paid the same. However, P could
only open a partial L/C, so the order of 220MT was split into two.

R informed P that it was ready to ship the steel products, and so it requested that the opening of the
L/C be made. However, despite several letters reiterating their request for the L/C to be opened, no
action was done by P. R even told P that its steel manufacturer was already in a difficult situation
because of Ps failure to open an L/C.
The following day, R received a letter signed by Chan asking for an extension of time to open the L/C
because Ps credit line with the bank had been fully availed of already and they were waiting for an
additional credit line. R replied with a request that they be informed at the earliest possible time when
the L/C would be opened because it was already incurring warehousing costs. In view of their good
business relationship, R even offered to negotiate with POSCO for a discounted price.
However, despite Rs letters with regard to the L/C, P wasnt able to open one. This prompted R to
write a letter to P, through its counsel, that if an L/C would not be opened, they would be compelled to
cancel the contract and hold P liable for breach and damages (warehouse expenses, interests,
charges, etc.)
Later, two invoices were sent by R to P, now officially covering 100MT per invoice and also with a
reduced price. The invoices both bear the signature of Chan. P finally was able to open an L/C for the
first invoice and so the goods were shipped to P. P then requested R for a reduced price as to the
second invoice considering the prevailing price of steel at that time and the recent strike that P
suffered.
R rejected the request and stated that if P would not be able to open the second L/C, they would be
compelled to cancel the contract and hold them liable for damages. Chan failed to reply.
Exasperated, R sent a letter to P cancelling the contract and demanding payment for losses,
warehousing expenses, interests and charges. R also filed a civil action for damages and breach
against P. On the other hand, P attacked the failure of R to present the original pro forma invoices
(only the photocopies were adduced). TC: docs admissible according to the E-Commerce Act of
2000. TC also ruled in favor of R, holding P, Seiki and Chan liable. CA affirmed but absolved Chan.
However, P was contesting the award of actual damages and attorneys fees.
ISSUES:
1) Whether the print-out and/or photocopies of facsimile transmissions are electronic evidence and
admissible as such;
2) Whether there was a perfected contract of sale between MCC and Ssangyong, and, if in the
affirmative, whether MCC breached the said contract; and
3) Whether the award of actual damages and attorney's fees in favor of Ssangyong is proper and
justified.
RATIO:
Re: Admissibility of the photocopied documents
First question is W/N the documents are deemed electronic data messages or electronic
documents within the context of the E-Commerce Act before ruling W/N the photocopies can be
covered by the law.
ANG HABA NG EXPLANATION pero basta ang sinasabi lang nila e hindi electronic data message or
electronic document ang fax, therefore, not covered by the E-Commerce Act inadmissible if mere
photocopies. However, there were some photocpoied invoices that were not challenged by P.
Therefore, these can be admitted.

Re: Perfected Contract of Sale

BUT R was able to prove the existence of a contract of sale by preponderance of evidence. R

presented several pro forma invoices with the conforme (signature) of Chan, several letters of R
requesting that P open an L/C, letters from Chan requesting for an extension of time, demand letters,
etc.
The conduct of both parties also proved the perfection of a contract of sale. Therefore, P's inability to
open a second L/C is a breach of contract. Damages for such breach may include loss of profit which
the seller would reasonably have made.
Re: Damages
However, the Court disagrees with the award of actual damages. Such cannot be presumed but must
be proven with a reasonable degree of certainty.
Actual or compensatory damages are those awarded in order to compensate a party for an injury or
loss he suffered. They arise out of a sense of natural justice and are aimed at repairing the wrong
done. Except as provided by law or by stipulation, a party is entitled to an adequate compensation
only for such pecuniary loss as he has duly proven. It is hornbook doctrine that to be able to recover
actual damages, the claimant bears the onus of presenting before the court actual proof of the
damages alleged to have been suffered, thus:
A party is entitled to an adequate compensation for such pecuniary loss actually suffered by him as
he has duly proved. Such damages, to be recoverable, must not only be capable of proof, but must
actually be proved with a reasonable degree of certainty. We have emphasized that these damages
cannot be presumed and courts, in making an award must point out specific facts which could afford a
basis for measuring whatever compensatory or actual damages are borne.
In the instant case, the trial court awarded to respondent Ssangyong US$93,493.87 as actual
damages. On appeal, the same was affirmed by the appellate court. Noticeably, however, the trial and
the appellate courts, in making the said award, relied on the following documents submitted in
evidence by the respondent: (1) Exhibit "U," the Statement of Account dated March 30, 2001; (2)
Exhibit "U-1," the details of the said Statement of Account); (3) Exhibit "V," the contract of the alleged
resale of the goods to a Korean corporation; and (4) Exhibit "V-1," the authentication of the resale
contract from the Korean Embassy and certification from the Philippine Consular Office.
The statement of account and the details of the losses sustained by respondent due to the said
breach are, at best, self-serving. It was respondent Ssangyong itself which prepared the said
documents. The items therein are not even substantiated by official receipts. In the absence of
corroborative evidence, the said statement of account is not sufficient basis to award actual damages.
The court cannot simply rely on speculation, conjecture or guesswork as to the fact and amount of
damages, but must depend on competent proof that the claimant had suffered, and on evidence of,
the actual amount thereof.
Furthermore, the sales contract and its authentication certificates, Exhibits "V" and "V-1," allegedly
evidencing the resale at a loss of the stainless steel subject of the parties' breached contract, fail to
convince this Court of the veracity of its contents. The steel items indicated in the sales contract with
a Korean corporation are different in all respects from the items ordered by petitioner MCC, even in
size and quantity.
From the foregoing, we find merit in the contention of MCC that Ssangyong did not adequately prove
that the items resold at a loss were the same items ordered by the petitioner. Therefore, as the claim
for actual damages was not proven, the Court cannot sanction the award.
Nonetheless, the Court finds that petitioner knowingly breached its contractual obligation and
obstinately refused to pay despite repeated demands from respondent. Petitioner even asked for
several extensions of time for it to make good its obligation. But in spite of respondent's continuous
accommodation, petitioner completely reneged on its contractual duty. For such inattention and

insensitivity, MCC must be held liable for nominal damages. "Nominal damages are 'recoverable
where a legal right is technically violated and must be vindicated against an invasion that has
produced no actual present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown.'" Accordingly, the Court
awards nominal damages of P200,000.00 to respondent Ssangyong.
As to the award of attorney's fees, it is well settled that no premium should be placed on the right to
litigate and not every winning party is entitled to an automatic grant of attorney's fees. The party must
show that he falls under one of the instances enumerated in Article 2208 of the Civil Code.118 In the
instant case, however, the Court finds the award of attorney's fees proper, considering that petitioner
MCC's unjustified refusal to pay has compelled respondent Ssangyong to litigate and to incur
expenses to protect its rights.
WHEREFORE, PREMISES CONSIDERED, the appeal is PARTIALLY GRANTED. The Decision of
the Court of Appeals in CA-G.R. CV No. 82983 is MODIFIED in that the award of actual damages is
DELETED. However, petitioner is ORDERED to pay respondent NOMINAL DAMAGES in the amount
of P200,000.00, and the ATTORNEY'S FEES as awarded by the trial court.

ii. Proximate
LAMBERTO SONGCO, plaintiff-appellee, vs. GEORGE C. SELLNER, defendant-appellant (1917;
GR No. L-11513; J. Street)
FACTS:
In December 1915, Sellner owned a farm at Floridablanca, Pampanga, which was contiguous to a
farm owned by Songco. Both properties had a considerable quantity of Sugar cane ready to be cut.
At Dinalupijan, a short distance away, there was a sugar central. Sellner desired to mill his cane at
this central. However, the owners of the central were not sure if they could mill his cane and would
not promise to take it. Sellner, however, upon learning that the central was going to mill Songco's
cane, thought of buying the cane of the latter, expecting to run his own cane in that same time the
other should be milled. He also thought of getting a right of way over Songco's land for converting his
own sugar to the central.
Accordingly Sellber bought Songco's cane for P12K and executed therefor 3 promissory notes (PN)
of P4K/each. Two of these notes were paid.
An action to recover upon the third PN was commenced where the judgment was in favor of Songco.
Sellner appealed. Thus, the instant case.
Sellner denied all the allegations in the complaint. He also asserted, by by way of special defense,
that the PN in question was obtained from the defendant by means of certain false and fraudulent
representations therein specified.
ainst Sellner, at the
time of the institution of the suit, upon the ground that he was disposing of his property in fraud of his
creditors. This charge was completely refuted by proof showing that Sellner is a man of large
resources and had not attempted to convey away his property as alleged. The court below therefore
found that this attachment had been wrongfully sued out, and awarded damages to Sellner equivalent
to the amount actually paid out by him in procuring the dissolution of the attachment. No appeal was
taken from this action of the court by the Songco.

Sellner assigns error to the action of the court in refusing to award to him further damages for the
injury done to his credit. In this connection he shows that one of his creditors, being appraised of the
fact that the defendant had been made the subject of an attachment, withheld further credit and
forced him to sell a large quantity of sugar at a price much lower than he would have received if he
could have carried it a few weeks longer.

ISSUE:
WON further damages (i.e. damages other than the cost he incurred in procuring the dissolution of
said attachment) should be awarded to Sellner in view of the attachment wrongfully sued out against
him
RULING: NO.
Re. Damages
The court below committed no error in refusing to award damages upon this ground, as such
damages were REMOTE and SPECULATIVE. It could hardly be foreseen as a probable
consequence of the suing out of this attachment that the hands of the creditors would come down
upon their unfortunate client with such disastrous results; and Songco certainly cannot be held
accountable for the complications of Sellner's affairs which made possible the damage which in fact
resulted.
The court below also refused to award punitive damages claimed by Songco on the ground that the
attachment was maliciously sued out. The action of the court in this respect will not be here disturbed.
==
Other issues resolved by the Court
1. A general denial of a complaint does not raise a question as to the genuineness or due
execution of a written instrument. It is necessary that the genuineness and due execution of
the instrument shall be specifically denied before an issue is raised up on this point. This
means that Sellner must declare under oath that he did not sign the document or that it is
otherwise false or fabricated.
Neither does the statement of the answer to the effect that the instrument was procured by fraudulent
representation raise any issue as to its genuineness or due execution. On the contrary such a plea is
an admission both of the genuineness and due execution thereof, since it seeks to avoid the
instrument upon a ground not affecting either. Furthermore, in this particular case the the answer
expressly admits the execution of the instrument by Sellner.
2. re: Songcos alleged fraudulent representation
Sellner: Songco estimated that the uncut cane standing in the fields would produce 3,000 piculs of
the sugar and that Sellner bought the crop believing this estimate to be substantially correct. As the
crop turned out, it produced 2,017 piculs, gross, and after the toll for milling was deducted the net left
to Sellner was very much less.
SC: It appears that in the course of negotiations Sellner requested Songco to guarantee the quantity
which the latter claimed to be in fields but he would not do so. He, however, repeated that he was
sure the fields contained the quantity estimated by him.
It is fairly shown by the evidence that Songco knew at the time he made the representation in
question that he was greatly exaggerating the probable produce of his fields, and it is impossible to
believe that his estimate honestly reflected his true opinion. He knew what these same fields had

been producing over a long period of years; and he knew that, judging from the customary yield, the
harvest of this year should fall far below the amount stated.
Notwithstanding the fact that Songco's statement as to the probable output of his crop was
disingenuous and uncandid, Sellner must pay the price stipulated. The representation in question can
only be considered matter of opinion as the cane was still standing in the field, and the quantity of the
sugar it would produce could not be known with certainty until it should be harvested and milled.
Undoubtedly Songco had better experience and better information on which to form an opinion on this
question than Sellner. Nevertheless the latter could judge with his own eyes as to the character of the
cane, and it is shown that he measured the fields and ascertained that they contained 96 1/2
hectares.
3. The law allows considerable latitude to seller's statements, or dealer's talk. The refusal of the
seller to warrant his estimate should have admonished the purchaser that that estimate was
put forth as a mere opinion; and we will not now hold the seller to a liability equal to that which
would have been created by a warranty, if one had been given.
Assertions concerning the property which is the subject of a contract of sale, or in regard to its
qualities and characteristics, are the usual and ordinary means used by sellers to obtain a high price
and are always understood as affording to buyers no ground for omitting to make inquiries. A man
who relies upon such an affirmation made by a person whose interest might so readily prompt him to
exaggerate the value of his property does so at his peril, and must take the consequences of his own
imprudence.
ABESAMIS v WOODCRAFT
28 November 1969 || Makalintal, J.
FACTS
P doing business as "East Samar Lumber Mills," owned a timber concession and sawmill at Dolores,
Samar. On November 8, 1950 R entered into an agreement to purchase from P 300,000 board feet of
Philippine round logs at P60.00 per thousand board feet. Due to bad weather and the failure of R to
send the necessary vessels to Samar, only 13,068 board feet of logs were delivered.
January 22, 1951 they made a new contract. Old was one cancelled and P waived all his claims
thereunder. Advances given by R to P of P9,000.00, were transferred to and considered as advances
on the new contract. R would now purchase 1,700,000 board feet of logs at P78.00 per thousand and
the rest at P70.00. The shipment was to be "before the end of July, but will not commence earlier than
April with the option to make partial shipment depending on the availability of logs and vessels."
Only two shipments were made amounting to 333,832 board feet and 128,825 board feet. P filed an
action for rescission of the contract of January 22, 1951 and for recovery of damages in the sum of
P155,000.00 by reason of Rs failure to send vessels to accept the shipments made by P.
CFI ruled in favor of P, rescinded the contract and awarded damages in the amount of P145,623.03,
plus the amount of P50,000.00 representing the plaintiff's actual loss of credit in the operation of his
business, and, another sum of P5,000.00 as attorney's fees. The defendant is likewise ordered to pay
the costs.
ISSUE
WON R failed to comply with its obligation to furnish the vessel to receive the shipment of logs from
appellee making them liable for damages

RULING
The contract does not expressly provide as to which of the parties should furnish the vessel. But it
does contain provisions which show clearly, albeit only by implication, that the obligation to do so
devolved upon R, thus:
Fees & Charges: Bureau of Forestry inspection charges and Philippine Government wharfage fees
are for account of Woodcraft Works, Ltd.
Dispatch of Ship: Immediately upon arrival of the vessel at Dolores, Samar, you will commence
loading at the rate of 200,000 bd. ft. per working day per four hatches. Should the weather be
unfavorable, be sure to have a certificate signed by the captain confirming time idle due to this fact.
Furthermore, in the event the ship's gears are not functioning well, kindly do likewise and get a
statement from the captain.
Demurrage: Failure to load 200,000 bd. ft. per working day, you agree to pay us the sum of P800.00
per day pro-rata.
The wharfage dues, demurrage and condition of the weather and of the ship's machinery, would have
been of little concern to R and would not have been imposed by it if P were the one to furnish the
vessel. Besides, the contemporaneous and subsequent acts of the parties, which determine intention
point unequivocally to the same conclusion. In the two shipments of logs in March and April the
vessels "SS AEULUS" and "SS DON JOSE" were furnished by R. In several telegraphic
communications exchanged between the parties it was invariably P who requested information as to
the arrival of the vessels. It was R, through witness Irza Toeg, who explained at trial its failure to
furnish the necessary vessels, as follows:
A. Well, when the shipping firms in Manila learned about the failures of the vessels which we sent to
Dolores, Samar to load, and news travels fast from one shipping company to the other, the other
shipping companies were very hesitant when we asked for a vessel to call at the port of Dolores
because shipping companies as a rule do not want to gamble and sent vessels to a loading port when
they know of the place and they know that the people operating there would not be able to handle the
loading of the vessels judging from their past performances. The vessels used were only attained
through personal connections.
R also says P was not in a position to comply with his own obligation to ship the quantities of logs
because of a certificate issued by the Bureau of Forestry showing that production amounted only to
816,795 board feet of logs, which was short by 833,205 board feet. but this was satisfactorily
explained by P, saying that this number was merely what was reported, and not the amount
produced. P categorically stated on the witness stand that by the end of July 1951 he had 1,300,000
board feet of logs available.
DAMAGES
P divides his claim for damages into three categories, each based on a separate breach of contract
by appellant.
First, P maintains that due to the failure of R a storm in May 1951 swept away almost all the logs then
awaiting shipment, amounting to 410,000 board feet, valued at P73,537.77. Shipment was to be
made before the end of July 1951, but not to commence earlier than April of the same year. The
obligation between the parties was a reciprocal one, appellant to furnish the vessel and appellee to
furnish the logs. The obligation being reciprocal and with a period, neither party could demand
performance nor incur in delay before the expiration of the period. Consequently, when the typhoon
struck on May 5, 1951 there was yet no delay on the part of R, and the corresponding loss must be

shouldered by P.
Second, after the storm of May 5, 1951 P continued logging. R was urged to send a vessel to take
delivery but the vessel did not arrive. 60,000 board feet of logs which had been rafted broke loose
and were lost amounting to P7,685.26, representing the value of the logs lost, the cost of rafting and
other incidental expenses. Although the obligation would not become due until July 31, 1951 R
waived the benefit of the period by assuring P that it would take delivery of the logs on June 25, 1951.
R should bear the corresponding loss.
Third by the end of July 1951 appellee had sufficient logs ready for shipment in accordance with the
contract. But R, failed to send a vessel on the aforesaid date. There is no evidence that such failure
was due to circumstances beyond control. As a result logs totalling 800,000 board feet were
destroyed by marine borers, causing a loss of P62,000.00, for which R should be held liable.
CFI sentenced R to pay P50,000.00 representing loss of credit in the operation of his business. The
decision does not say upon what evidence the award is based. Nor is there any attempt in Ps brief to
justify the amount awarded. Actual or compensatory damages must be established by clear evidence.
Judgment appealed from is affirmed, with the modification that R is sentenced to pay the aggregate
sum of P69,685.26 by way of damages, plus P5,000 as attorney's fees, without costs in this instance.
Iii. Not Speculative
SEAVAN CARRIER, INC. and RENATO GACHO, petitioners, vs. GTI SPORTSWEAR
CORPORATION (formerly GRI Garments International Corp) and THE HON. ABELARDO
DAYRIT, in his capacity as Judge of CFI Manila Branch 39, respondents
G.R. L-65953 || July 16, 1985
FACTS:
- Seavan Carrier lost 100 cartons of denim jeans in transit. Petitioners and private respondents
were parties in Civil Case No. R-83-3585 entitled GTI Sportswear Corporation, plaintiff, v.
Seavan Carrier, Inc., et al., defendants, for recovery of a sum of money and damages in the
defunct Court of First Instance of Manila.
- On September 14, 1981, the trial court rendered a decision in favor of the plaintiffs, the private
respondents herein. The defendants below, now petitioners herein were ordered to pay to the
plaintiff:
a. P182,053.92 representing the value of 100 cartons of denim jeans lost plus legal
rate of interest;
b. P160,755.00 representing tariff and customs duties paid by the private respondent
on the lost items;
c. P2,400,000.00 representing losses in the goodwill of plaintiff (based on possible
gross earnings, had its foreign customers not learned about the loss);
d. 20% of said amount as attorney's fees; and
e. Costs of the proceedings.
- This decision, among others, was sought to be reconsidered in an earlier case filed by the
petitioners before this Court in connection with Civil Case No. R-83-3585. In that petition (G.R.
No. 62130), this Court, on January 12, 1983, issued the following resolution, to wit:
After deliberating on the petition, the comment filed by the respondents, and the petitioners' reply to
the respondents' comment, the Court Resolved to GIVE LIMITED DUE COURSE to the petitioner
only insofar as the allegedly excessive damages awarded by the respondent court in the amount of
P2,400,000.00 representing purported losses in the goodwill of the private respondent are concerned
and to REQUIRE the parties to submit simultaneously their respective memoranda on the above

specific issue within fifteen (15) days from notice hereof. Except for the above issue, the petition is
DENIED due course and, therefore, execution may issue upon finality hereof as to the judgment
award of P182,053.92 representing the value of 100 cartons of denim jeans lost plus legal rate of
interest; the P160,755.00 representing tariff and customs duties paid by the private respondent on the
lost items; 20% of the said amount as attorney's fees; and costs of proceedings.
-

Pursuant to this resolution, the trial court issued an order of partial execution of judgment. In
the subsequent public sale, the respondents emerging as the highest bidder offering the sum
of P462,000.00 for eleven units of trucks and accessories.
Seavan Carrier, Inc. was given forty-five (45) days to come up with the entire obligation to GTI
Inc. in the amount of six hundred ninety-seven thousand one hundred forty- two & 58/100
(P697,142.58) including interest (P21,896.48 per month) and expenses at the time of payment
shall reconvey to Seavan Carrier, Inc. the aforesaid eleven (11) units in full satisfaction of the
judgment.
On April 25, 1983, the petitioners filed an urgent motion for protective order. The motion
alleged that on April 18, 1983, the defendant-company through its president tried to tender the
sum of P697,142.58 to secure release of the eleven (11) units of trucks and accessories per
agreement but instead, the plaintiffs through counsel were demanding P1,014,585.84; the
petitioners prayed that the respondents be made to comply with the collateral agreement and
that the deputy sheriff be required to make his return itemizing the amounts due and lawful
charges incident to the sale.
On May 30, 1983, the trial court issued an order denying the aforesaid motion.
On September 28, 1984, this Court promulgated a decision in G.R. No. 62130 modifying the
trial court's decision insofar as the P2,400,000.00 award representing losses in the goodwill of
respondents was concerned. Except for this award, which was deleted, all the other money
awards in Civil Case No. R-8335185 were affirmed.
The petitioners maintain that there was an irregular execution of the judgment and, therefore,
in accordance with the accepted principle that the court has control over the execution of a
judgment, there is reason to issue the corresponding protective order to prevent injustice to
them. They cite Rule 135 of the Rules of Court. The petitioners contend that (1) the total
amount of the awards under the judgment is much less than the total bid of the private
respondents in the sheriff's sale iii the amount of P462,000.00 and (2) "petitioners had always
demanded for the production of the receipt of payment to the Bureau of Customs of the sum of
P160,155.00 representing duties and taxes; and this is material because the ratio decidendi of
the decision of the court a quo that held that there was no exportation of the stolen materials.
The trial court denied the urgent motion for protective order and notice of appeal on the ground
that under the circumstances it had no more jurisdiction over the case, the execution
proceedings therein having been terminated

ISSUE:
- WON there was an irregular execution of the judgment
- WON they are entitled to the P2.4M representing losses for goodwill
HELD:
- The general rule is "A case in which an execution has been issued is regarded as still pending
because proceedings on the execution are proceedings in the suit. The execution
proceedings of the subject judgment had not yet been terminated when the petitioners filed
their urgent motion for protective order. The certificate of sale issued by the deputy sheriff in
favor of the private respondents was only for the satisfaction of P462,000.00 which obviously is
not a full satisfaction of the judgment. This can be gleaned from the fact that a total amount of
P608,000.00 to be recovered from the petitioners by the private respondents pursuant to the
judgment was arrived at by the deputy sheriff as evidenced by the "notice of sale of personal

property." (Annex 2, Memorandum for private respondents) Moreover, the parties' collateral
agreement itself shows that the P462,000.00 was but a partial satisfaction of the judgment.
- Hence, the trial court, pursuant to its supervisory control over the execution of the judgment
should have ordered a hearing on the motion to determine the actual amount to be recovered
by the private respondents for the full satisfaction of the judgment. The determination of the
exact liability of the petitioners in faithful compliance with the judgment of the court is vital
considering that the judgment itself did not fix the exact liability due to the private respondents
and that the petitioners in the motion alleged that the private respondents were asking for more
than the legal rate of interest. Obviously, these are questions of fact and law which are directly
involved in the execution of the judgment. The amount of 2.4M is speculative. No evidence
was presented to show the average actual profits realized to enable the court to reasonably
ascertain the amount of actual damages GTI suffered.
- It is to be emphasized, however, that the petitioners at this stage of the proceedings may no
longer question the propriety of the P462,000.00 bid of the private respondents in relation to
the properties sold at public auction. At no instance did the petitioners raise an objection to the
P462,000.00 bid of the private respondents on the levied properties. In fact, as observed by
the court, the president of the petitioner company signified his conformity with the bid as
evidenced by the "notice of sale on execution of personal property."
Moreover, a certificate of sale on these properties in favor of the private respondents had already
been issued on April 12, 1983 for a partial satisfaction of the judgment. In effect, this part of the
judgment, having been satisfied, has passed beyond review. It is this part of the execution
proceedings involving the auction sale of the levied properties in the amount of P462,000.00 over
which the trial court has lost its jurisdiction but not the entire proceedings.
CARMEN SIGUENZA and HELENA SIGUENZA, petitioners, vs. HON. COURT OF APPEALS and
SPS. PEDRO and LEONADIZA QUIMBO, respondents
G.R. L-44050 || July 16, 1985
FACTS:
- Petitioners entered into a contract with the spouses Quimbo for the sale of two lots purportedly
owned by Carmen and Helena Siguenza, and which were Identified as Lot Nos. 1 and 2, Block
1, Phase II of the Clarita Village; that the said lots were to be paid in the total amount of
P15,200.00 of which the amount of P3,040.00 was to be paid upon the execution of the
contract of sale and the balance of P12,160.00 to be paid in monthly installments and that
subsequently, however, the spouses Quimbo discovered that as early as 1969, the petitioners
had already sold and conveyed the same lots to Irenea D. Maningo and that both are now
covered by Transfer Certificates of Titles Nos. T-48546 and T-48547 in the name of the latter.
The complaint further alleged that because of this double sale, the spouses Quimbo
demanded from the petitioners the return of their downpayment but the latter refused and that
as a consequence of the. deceit and mis-representation employed upon them by said
petitioners, the spouses were also prevented from constructing their house worth P100,000.00
on the lots which if constructed at the present would cost them three hundred (300%) percent
more than the original amount.
-

In their answer, petitioners admitted the sale of the lots to the spouses but argued that they
had nothing to do with the sale as the one responsible was Bert Osmea and Associates.
Petitioners also alleged that the impleading of Carmen Siguenza as a party defendant had no
basis because the lots in dispute were originally registered only in the name of Helena
Siguenza.

The other defendant, Bert Osmea and Associates admitted the sale of the lots to Irenea

Maningo but countered that such sale was only for the purpose of enabling the latter to obtain
a loan from the Government Service and Insurance System. Since the loan did not materialize.
the whole transaction collapsed and during the process of reverting the lots back to the
subdivision, the spouses Quimbo showed interest and deposited money for the lots although
they were fully aware of the status of the said lots. Bert Osmea and Associates also alleged
that after the downpayment no further installments were paid by the spouses
-

RTC ruled in favor of Sps. Quimbo. In their Motion for Reconsideration, the petitioners made
an enumeration of the findings and conclusions of the lower court which were allegedly not
supported by evidence. The petitioners also attached a "Deed of Partition" dated February 25,
1969 for the purpose of showing that petitioner Carmen Siguenza had no more right over the
disputed lots at the time of the sale to the spouses Quimbo, and therefore, should not have
been made a party defendant in the complaint.

On May 20, 1975, the trial court issued an order denying the motion for reconsideration on the
ground that the same were "pro forma based as it is on a forgotten evidence a so-called deed
of partition supposedly executed in 1969, which was not introduced by defendants Carmen and
Helena Siguenza; ..." A writ of execution was then issued. CA affirmed, saying petitioners have
lost their right to appeal, as they have to perfect it on June 17, 1975, but they filed it only on
June 30 of the same year.

ISSUE:
- WON petitioners have lost their right to appeal
- WON the demand for P100,000.00 for compensatory damages may rightfully be awarded
HELD:
- YES they have, but to serve the ends of substantial justice, it may be ruled upon by this court.
In the case at bar, the petitioners' delay in filing their record on appeal should not be strictly
construed as to deprive them of the right to appeal especially since on its face the appeal
appears to be impressed with merit. A prompt disposition of this present petition would,
therefore, enable the private respondents to collect from the petitioners whatever amounts Bert
Osmea and Associates have not yet paid to fully satisfy the liability adjudged against the latter
which may be rightly demanded from herein petitioners but not duplicated as this would be
unjust enrichment on the part of the respondents.
-

Resolving now the merits of the case, we find that the orders of the trial court ordering the
petitioners to pay the private respondents P100,000.00 for compensatory damages is patently
erroneous because no proof whatsoever was presented or could be presented by the private
respondents to show that they had actually suffered pecuniary loss in that amount. In fact, the
whole amount of P100,000.00 had no basis at all except the respondents' mere allegation that
they, absent the malice, bad faith, and unlawful and deceitful acts of the petitioners, "could
have then constructed a residential house worth P100,000.00; that the same residential house
cannot now be constructed at that amount, but very likely at more than three hundred percent
more; such difference constitutes an actual damage on the part of the plaintiffs (respondents)
which are directly logically and naturally caused by the aforesaid acts of defendants
(petitioners) for which said defendants are liable."

In the case of Sy v. Court of Appeals (131 SCRA 127), we ruled that an alleged loss of income
is not recoverable for being speculative as no receipt or any kind of evidence on the matter
was presented to prove it. Likewise, in the case of Seavan Carrier, Inc. v. GTI Sportswear
Corp. (132 SCRA 314-315), quoting G.A. Machineries, Inc. v. Yaptinchay (126 SCRA 87), we
ruled that for damages under Article 2200 of the Civil Code to be recovered, the best evidence

obtainable by the injured party must be presented

In the present case, the respondents were not able to prove any actual losses suffered as a
result of the petitioners' wrongful acts because they have not even started the construction of
their house on the disputed lots. Any alleged pecuniary loss which they claim to have suffered
because of the delay in the commencement of construction is purely speculative and cannot
be the basis of compensatory damages as provided by law.

2. Component Elements
I. Value of Loss; Unrealized profits
Art. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but
also that of the profits which the obligee failed to obtain. (1106)
Art. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or permanent personal
injury;
(2) For injury to the plaintiff's business standing or commercial credit.
GENERAL ENTERPRISES, INC., plaintiff-appellee vs. LIANGA BAY LOGGING CO., INC.,
defendant-appellant
August 31, 1964 (Bautista Angelo, J.)
FACTS
Lianga Bay Logging (producer of logs from a timber concession) and General Enterprises entered
into a contract where Lianga designated General as distributor of a portion of its log production to
Korea and Europe on condition that it would pay General a commission of 13% of the gross f.o.b.
value of the logs exported. Their agreement provides, in part:
xxx
5. DISTRIBUTOR hereby agrees and obliges to market, sell, export and dispose under this
agreement at least ONE MILLION (1,000,00) BOARD FEET BREARETON SCALE for PRODUCER
every month during the first months of the term of this agreement: and the PRODUCER hereby
agrees and obliges that each month thereafter, beginning September, 1959, PRODUCER will make
available not less than 2,000,000 bd. ft. per month for export to the sales area.
xxx
8. It is mutually agreed as follows:
(a) That if either party shall be unable, by reason of the happening of any one or more of the causes
set forth in the next succeeding paragraph marked "(b)" to carry out its obligations under this contract,
either wholly or partly, the party so failing shall give notice and full particulars of such cause or causes
in writing to the other party as soon as possible after the occurrence of any such cause; and,
thereupon, such obligation shall be suspended during the continuance of such causes, which,
however, shall be removed or remedied as soon as possible, and the obligations terms and
conditions of this contract shall be extended for such period as may be necessary for the purpose of
making good any suspension so caused:
(b) That the cause or causes of suspension herein before referred to shall be taken to mean fire,
flood, casualty, unavoidable accident, strikes, labor conditions, lockout acts of God, the enactment of
any national or local law or ordinance, or the issuance of any executive or judicial order, the issuance
of any prohibitive or restrictive order, rule or regulation by the Central Bank of the Philippines or other

government agency, accident to machinery, or any other cause not within the control of the party
making relief from any of the requirements of this contract, and that, by the exercise of due care and
diligence, the said party is unable to prevent or overcome.
xxx
On October 1959, Lianga sent a notice to General stating that after the November shipment, there will
no longer be logs available for export to Korea and Europe unless the price becomes comparable to
what is expected to be received in the way of returns from lumber and veneer of barterable and
exportable grades.
General reminded Lianga that it had a contact to fulfill relative to its log production otherwise it would
be held responsible for the consequences of the breach it may ensue, but Lianga did not heed this.
Hence, General filed an action before the CFI RIzal alleging breach of contract and praying for actual
and compensatory damages.
CFI decided in favor of General and against Lianga, ordering ordering the latter to pay the sum of
P400,000.00 as actual damages, P100,000.00 as exemplary damages, and P400,000.00 as
attorney's fees and expenses of litigation.
This is an appeal from said decision.
Lianga contends that the actual damages awarded to General are unwarranted inasmuch as the latter
failed to adduce evidence to substantiate them even assuming arguendo that Lianga failed to supply
the additional monthly 2M board feet for the remainder of the period agreed upon in the contract.
Lianga argues that for General to be entitled to demand payment of sales that were not effected, it
should have proved that (1) there are actual sales made of General's logs which were not fulfilled, (2)
that it had obtained the best price for such sales, (3) that there are buyers ready to buy at such price
stating the volume they are ready to buy, and (4) General could not cover the sales from the logs of
other suppliers. Since these facts were not proven, General's right to unearned commissions must
fail.
ISSUE relevant to damages:
Is the lower court's adjudication of actual damages, exemplary damages and attorney's fees justified?
RULING: ACTUAL & ATTYS FEES YES; EXEMPLARY REDUCED
Under Article 2200 of the Civil Code, indemnification for damages comprehends not only the value of
the loss suffered but also at of the profits which the creditor fails to obtain. In other words, lucrum
cessans is also a basis for indemnification. The question then that arises is: Has appellee failed to
make profits because of appellant's breach of contract, and in the affirmative, is there here basis for
determining with reasonable certainty such unearned profits?
From Lianga's memorandum, it appears that during the period of June-December 1959, in spite of the
short delivery incurred by Lianga, General had been earning its commission whenever logs were
delivered to it. But from January 1960, General has ceased to earn commission because Lianga
failed to deliver any log in violation of their agreement. Had Lianga continued to deliver the logs as it
was bound to pursuant to the agreement, it is reasonable to expect that it would have continued
earning its commission in much the same manner as it used to in connection with the previous
shipments of logs, which clearly indicates that it failed to earn the commissions it should earn during
this period of time. And this commission is not difficult to estimate.
Thus, during the seventeen remaining months of the contract, at the rate of at least 2M board feet,

Lianga should have delivered 34M board feet. If we take the number of board feet delivered during
the months prior to the interruption, namely 7,405,861 board feet, and the commission received by
General thereon, which amounts to P79,580,82, we would have that General received a commission
of P.0107456 per board feet. Multiplying 34M board feet by P.0107456, the product is P365,350.40,
which represents the lucrum cessans that should accrue to General. The award therefore, made by
the trial court of P400,000.00 as compensatory damages is not speculative, but based on reasonable
estimate.
However, the exemplary damages in the amount of P100k is somewhat excessive as Lianga, in
suspending the operation of the contract, has not acted in a wanton, oppressive or malevolent
manner (Art. 2232 NCC) The most that can be said is that Lianga has availed to certain
misstatements or half truths in an attempt to justify its desistance from the contract. While
reprehensible, it is not a wanton or malevolent perversion of the truth. Hence, award should be
mitigated in the amount of P50k.
Wrt the amount of attorney's fees awarded, the SC found the same to be reasonable considering the
importance of the litigation and the amount of time and effort involved therein. This is justified under
Art. 2208 NCC.
CA DECISION MODIFIED only wrt the amount of exemplary damages.
RESOLUTION (November 28, 1964 --nilagay ko na rin dito pero Aug 31 talaga yung SCRA ref na
nasa syllabus)
Lianga assailed the award of P400k as lucrum cessans, on the ground that the award is not justified
considering the evidence + the obligation to supply the monthly 2M board feet was conditional + its
right to suspend the operation of the agreement under par. 8.
SC ruled that since defendant is guilty of breaking the agreement for reasons purely of its own, in
disregard of its express covenant, it held itself liable for all consequential damages that may result
from such breach, whether foreseen or unforeseen, and one of the items that may be considered in
determining said damages is the failure to realize whatever profits could have been earned during the
remaining life of the agreement. It is not, therefore, proper to base such damages purely in
transactions that had been accomplished in the past and ignore those that could have been
accomplished in the future. As the law says, in case of fraud or bad faith, "the obligor shall be
responsible for all damages that may be reasonably attributed to the non-performance of the
obligation" (Article 2201 NCC).
However, the lucrum cessans was eventually reduced the commission paid by General to Frinat
Int'l, sub-agent was deducted from the award made in its favor. The rate of commission plaintiff had
paid in its previous sales to Frinat Int' was 2%. Multiplying 34 million board feet by P.0107456, the
product is P365,350.40. Deducting therefrom the 2 % commission that corresponds to Frinat
International, which amounts to P56,207.76, the balance is P309,142.64, which should be the lucrum
cessans to which plaintiff is entitled.
+ No interest upon damages awarded as under Art. 2210, such award is in the discretion of hte court
and considering the circumstances, the SC does not deem it justified to further charge interest on the
damages involved.
AUGUST 31 DECISION modified: P309, 142.64 as lucrum cessans awarded
VICTORINO MAGAT, JR. substituted by heirs, OLIVIA D. MAGAT, and minors MA. DULCE

MAGAT, MA. MAGNOLIA MAGAT, RONALD MAGAT and DENNIS MAGAT, petitioners, vs.
COURT OF APPEALS and SANTIAGO A. GUERRERO, respondents.
4 August 2000 | Parido, J.:
FACTS: Guerrero Transport Services, of which Santiago A. Guerrero was President and Chairman of,
won a bid for the operation of a fleet of taxicabs within the Subic Naval Base, in Olongapo. As highest
bidder, Guerrero was to provide radio-controlled taxi service within the U. S. Naval Base, Subic Bay,
utilizing as demand requires 160 operational taxis consisting of four wheel, four-door, four
passenger, radio controlled, meter controlled, sedans, not more than one year With the advent of
martial law, President Ferdinand E. Marcos issued Letter of Instruction No. 1 1 and Administrative
Circular No. 4.2
Guerrero and Victorino D. Magat, as General Manager of Spectrum Electronic Laboratories, a single
proprietorship, executed a letter-contract for the purchase of transceivers at a quoted price of
US$77,620.59, FOB Yokohoma. Victorino was to deliver the transceivers within 60 to 90 days after
receiving notice from Guerrero of the assigned radio frequency, taking note of Government
Regulations. The contract was signed and Victorino contacted his Japanese supplier, Koide & Co.,
Ltd. And placed an order for the transceivers. Later, Navy Exchange Officer, A.G. Mason confirmed
that Guerrero won the bid for the commercial transportation contract.
Middleman and broker Isidro Aligada of Reliance Group Engineers, Inc. wrote Victorino, informing him
that a radio frequency was not yet assigned to Guerrero and that government regulations might
complicate the importation of the transceivers. In the same letter, Victorino was advised to advise his
supplier to proceed (with) production pending frequency information. Victorino was alaso assured of
Guerreros financial capability to comply.
Guerrero informed Aligada of the frequency number assigned by Subic Naval Base authorities, and
the latter was instructed to proceed with the order thru Spectrum Electronics Laboratories. Aligada
informed Magat of the assigned frequency number and advised Vicotrino to proceed upon receipt of
letter of credit. Guerrero applied for a letter of credit with the Metropolitan Bank and Trust Company
but this was not pursued.
Victorino, represented by his lawyer, Atty. Sinesio S. Vergara, informed Guererro that the order with
the Japanese supplier has not been canceled. Should the contract be canceled, the Japanese firm
would forfeit 30% of the deposit and charge a cancellation fee in an amount not yet known, Guerrero
to bear the loss. Further, should the contract be canceled, Victorino would demand an additional
amount equivalent to 10% of the contract price.
1

Letter of Instruction No. 1: "SUBJECT: SEIZURE AND CONTROL OF ALL PRIVATELY OWNED NEWSPAPERS, MAGAZINES, RADIO AND
TELEVISION FACILITIES AND ALL OTHERMEDIA OF COMMUNICATION.
...in my capacity as commander in chief of all the armed forces of the Philippines and in order to prevent the use of privately owned newspapers,
magazines, radio and television facilities and all other media of communications, for propaganda purposes against the government and its duly
constituted authorities or for any purpose that tend to undermine the faith and confidence of the people in our government and aggravate the present
national emergency, you are hereby ordered forthwith to take over and control or cause the taking over and control of all such newspapers,
magazines, radio and television facilities and all other media of communications, wherever they are, for the duration of the present national
emergency, or until otherwise ordered by me or by my duly designated representative.
Administrative Circular No. 4: SUBJECT: SUSPENDING THE ACCEPTANCE AND PROCESSING OF APPLICATIONS FOR RADIO STATION
CONSTRUCTION PERMITS AND FOR PERMITS TO OWN AND/OR POSSESS RADIO TRANSMITTERS OR TRANSCEIVERS.
"In view of the existence of a state of emergency and the declaration by the President of martial law in the entire country under Proclamation No.
1081 dated September 21, 1972, effective immediately the acceptance and processing by the radio control office of applications for radio stations
constructions permits and for permits to possess, own, transfer, purchase and sale of radio transmitters and transreceivers as well as manufacturers
and dealers permits of said equipment is hereby suspended. "Exempted from this circular are applications for radio station construction permits and
for permits to possess, own, transfer, purchase and sell radio transmitters and transceivers for the following radio stations:
"1. Aeronautical Stations;
" 2. Aeronautical Fixed Stations;
" 3. Aircraft Stations;
"4. Coastal Stations; and
"5. Ship Stations.
"This circular shall be strictly observed until lifted upon proper instructions from higher authorities."

Unable to get a letter of credit from the Central Bank due to the refusal of the Philippine
government to issue a permit to import the transceivers, Guerrero commenced operation of the taxi
cabs within Subic Naval Base, using radio units borrowed from the U.S. government (through the
Subic Naval Base authorities). Victorino thus canceled his order with his Japanese supplier.
Victorino filed a complaint for damages arising from breach of contract against Guerrero.
RTC: Granted motion to dismiss filed by Guerrero and dismissed complaint
SC: Set aside order of dismissal and remanded case to trial court for further proceedings.
RTC: ordered case be archived for failure of Victorino to prosecute.
Petitioners (heirs of Victorino) moved to reinstate the case and to substitute Victorino in its
prosecution as the latter had already died. TC granted this motion and decided in favor of the heirs. It
ordered Guerrero to pay temperate, moral and exemplary damages, and attorneys fees.
1. Ordering defendant to pay substituted plaintiffs the sum of P25,000.00 for temperate damages
for injury to plaintiffs business dealings with foreign and local businessmen;
2. P50,000.00 as moral damages;
3. P25,000.00 as exemplary damages; and
4. P20,000.00 as attorneys fees.
CA: dismissed the complaint, and denied MR.
ISSUES:
1) W/N the contract was valid
2) W/N there was a breach of contract
3) W/N damages may be awarded.
RULING:
1) Yes, the contract was valid as the radio transceivers subject of the contract were not
contraband. "Contraband" generally refers to "any property which is unlawful to produce or
possess." It refers to goods which are exported and imported into a country against its laws.
Nowhere in the LOI and Admin. Circular is there an express ban on the importation of
transceivers. The LOI and Administrative Circular did not render radios and transceivers
illegal per se. The Administrative Circular merely ordered the Radio Control Office to suspend
the "acceptance and processing of applications... for permits to possess, own, transfer,
purchase and sell radio transmitters and transceivers... Therefore, possession and importation
of the radio transmitters and transceivers was legal provided one had the necessary license for
it. Transceivers were not prohibited but merely regulated goods. The LOI and Administrative
Circular did not render the transceivers outside the commerce of man. They were valid objects
of the contract.
2) No, there was no breach in accordance with Article 1267 of the Civil Code. Guerrero testified
that a permit to import the transceivers from Japan was denied by the Radio Control
Board. He stated that he, together with Aligada, Victorino and a certain John Dauden
personally went to the Radio Control Office, and were denied a permit to import. They also
went to the Office of the President, where Secretary Ronaldo B. Zamora explained that radios
were "banned like guns because of martial law." Guerrero testified that this prevented him from
securing a letter of credit from the Central Bank. This testimony was not rebutted.
The law provides that [w]hen the service (required by the contract) has become so manifestly
beyond the contemplation of the parties, the obligor may also be released therefrom, in whole
or in part. Here, Guerrero's inability to secure a letter of credit and to comply with his
obligation was a direct consequence of the denial of the permit to import. For this, he cannot
be faulted. Even if we assume that there was a breach of contract, damages cannot be

awarded. Damnum absque injuria.

3) True, Guerrero borrowed equipment from the Subic Naval Base authorities at zero cost. This
does not automatically translate to bad faith. Guerrero was faced with the danger of the
cancellation of his contract with Subic Naval Base. He borrowed equipment as a prudent and
swift alternative. There was no proof that he resorted to this option with a deliberate and
malicious intent to dishonor his contract with Victorino. An award of damages surely cannot be
based on mere hypotheses, conjectures and surmises. Good faith is presumed, the burden of
proving bad faith rests on the one alleging it. Petitioners did not effectively discharge the
burden in this case.
MORAL DAMAGES: the breach must be palpably wanton, reckless, malicious, in bad faith,
oppressive or abusive. This is not the case here.
EXEMPLARY DAMAGES: Guerrero did not act in a wanton, fraudulent, reckless, oppressive or
malevolent manner.
ACTUAL DAMAGES: True, indemnification for damages contemplates not only actual loss
suffered (damnum emergens) but unrealized profits (lucrum cessans) as well. However, to be entitled
to adequate compensation for pecuniary loss, the loss must be actually suffered and duly proved. The
amount of loss must not only be capable of proof, but must be proven with a reasonable degree of
certainty. The claim must be premised upon competent proof or upon the best evidence obtainable,
such as receipts or other documentary proof.
Only the testimony of Aligada was presented to substantiate petitioners' claim for unrealized profits.
Aligada testified that as a result of the cancellation of the contract, Victorino had to suspend
transactions with his Japanese supplier for six (6) months. Aligada stated that the volume of
Victorino's business with Subic Naval Base also diminished significantly. Aligada approximated that
Victorino's unrealized business opportunities amounted to P400,000.00. Being a witness for
Victorino's heirs and standing to gain from the contract's fulfillment, Aligada's testimony is selfserving. It is also hearsay. We fail to see how this "evidence" proves actual damages with a
"reasonable degree of certainty." If proof is "flimsy", we cannot award actual damages.
ii. Attorney's fees and expenses of litigation
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.

SOLID HOMES vs CA
Private respondents sold 6 parcels of land to Solid Homes under a contract to sell for the total amount
of P10,211,075.00, to be paid in installments. Default on payments incur a 1% monthly interest on the
defaulted amount.
Solid Homes violated the terms of the agreement by refusing to pay the balance of P4,800,282.91
and by failing to negotiate a settlement with the tenants and squatters of the property despite its
receipt from Investco (respondent) of P350,000 for that purpose.
Both the Trial Court and Court of Appeals awarded payment of the balance with the corresponding
interest to private respondents, plus attorney's fees. Solid Homes argues that the award of attorney's
fees is not justified.
ISSUE: w/n the award of attorney's fees is justified
HELD: NO, award of attorney's fees is deleted
Solid Homes' act of withholding payment of the balance is justified, as there is still disagreement
between the parties on the demandability of the amount due and the accrual date of the interest due
to supervening circumstances and inexplicitness of the contract. To wit, the TC and the CA have
arrived at different conclusions on the date the interest rate should start to run (TC: Feb. 23, 1981,
CA: March 28, 1982).
Article 2208 of the Civil Code only allows the award of attorney's fees when the claimant is compelled
to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act
or omission of the party from whom it is sought. While judicial discretion is here extant, an award
thereof demands, nevertheless, a factual, legal or equitable justification.
In the case at bench, the records do not show enough basis for sustaining the award for attorney's
fees and to adjudge its payment by petitioner.
FIRST METRO INVESTMENT CORPORATION, petitioner, vs. ESTE DEL SOL MOUNTAIN
RESERVE, INC., VALENTIN S. DAEZ, JR., MANUEL Q. SALIENTES, MA. ROCIO A. DE VEGA,
ALEXANDER G. ASUNCION, ALBERTO* M. LADORES, VICENTE M. DE VERA, JR., and FELIPE
B. SESE, respondents.
Facts: On January 31, 1978, petitioner FMIC granted respondent Este del Sol a loan of
P7,385,500.00 to finance the construction and development of the Este del Sol Mountain Reserve, a
sports/resort complex project located at Barrio Puray, Montalban, Rizal. In accordance with the terms
of the loan agreement, R executed several documents as security for paymentreal estate
mortgage, individual suretyship agreements by co-respondents, as well as an Underwriting
Agreement. Since respondent Este del Sol failed to meet the schedule of repayment in accordance
with a revised Schedule of Amortization, it appeared to have incurred a total obligation of
P12,679,630.98. Accordingly, P foreclosed mortgage and instituted collection suit against Rs to
collect the alleged deficiency balance of P6,863,297.73 plus interest thereon and attorneys fees
(WHICH THEY PEGGED AT AROUND P3M). In their Answer, Rs sought the dismissal of the case
and set up several special and affirmative defenses, foremost of which is that the Underwriting and
Consultancy Agreements executed simultaneously with and as integral parts of the Loan Agreement
and which provided for the payment of Underwriting, Consultancy and Supervision fees were in reality
subterfuges resorted to by P and imposed upon respondent Este del Sol to camouflage the usurious
interest being charged by P.
RTC ruled in favor of R, CA reversed, declared that the fees provided for in the Underwriting and
Consultancy Agreements were mere subterfuges to camouflage the excessively usurious interest

charged by the petitioner FMIC on the loan of R Este del Sol; and that the stipulated penalties,
liquidated damages and attorneys fees ( were excessive, iniquitous, unconscionable and revolting to
the conscience, and declared that in lieu thereof, the stipulated one time 20% percent penalty on the
amount due and 10% of the amount due as attorneys fees would be reasonable and suffice to
compensate P for those items.
Issue: WoN the CA erred.
Held: No. There was a usurious loan! The Underwriting Agreements which were executed and
delivered contemporaneously with the Loan Agreement on January 31, 1978 were exacted by
petitioner FMIC as essential conditions for the grant of the loan. An apparently lawful loan is usurious
when it is intended that additional compensation for the loan be disguised by an ostensibly unrelated
contract providing for payment by the borrower for the lenders services which are of little value or
which are not in fact to be rendered, such as in the instant case. In this connection, Article 1957 of the
New Civil Code clearly provides that:
Art. 1957. Contracts and stipulations, under any cloak or device whatever, intended to circumvent
the laws against usury shall be void. The borrower may recover in accordance with the laws on
usury.
With regar
fees, excessive, iniquitous and unconscionable and revolting to the conscience as they hardly allow
the borrower any chance of survival in case of default. And true enough, R folded up when the
appellee extrajudicially foreclosed on Rs development project and literally closed its offices as both
the appellee and R were at the time holding office in the same building. Accordingly, we hold that
20% penalty on the amount due and 10% of the proceeds of the foreclosure sale as attorneys fees
would suffice to compensate the appellee, especially so because there is no clear showing that the
appellee hired the services of counsel to effect the foreclosure; it engaged counsel only when it was
seeking the recovery of the alleged deficiency.
Attorneys fees as provided in penal clauses are in the nature of liquidated damages. So long as
such stipulation does not contravene any law, morals, or public order, it is binding upon the
parties. Nonetheless, courts are empowered to reduce the amount of attorneys fees if the same is
iniquitous or unconscionable. Articles 1229 and 2227 of the New Civil Code provide that:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly
or irregularly complied with by the debtor. Even if there has been no performance, the penalty may
also be reduced by the courts if it is iniquitous or unconscionable.
Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.
In the case at bar, the amount of P3,188,630.75 for the stipulated attorneys fees equivalent to 25%
percent of the alleged amount due, as of the date of the auction sale on June 23, 1980, is manifestly
exorbitant and unconscionable. Accordingly, we agree with the appellate court that a reduction of the
attorneys fees to 10% appropriate and reasonable under the facts and circumstances of this case.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK v JOSEPH ANTHONY M. ALEJANDRO
September 21, 2007
Ynares-Santiago, J.
FACTS:
- October 23, 1997: PCIB filed against Alejandro a complaint for a sum of money with prayer for the
issuance of a preliminary attachment
o The claim alleges that on Sept. 10, 1997, Alejandro, a resident of Hongkong executed a
promissory note obligating himself to pay 249M plus interest
o In view of the fluctuations of the foreign exchange rates, which resulted in the insufficiency of

the deposits assigned by the respondent as security for the loan, petitioner requested the
latter to put up additional security for the loan.
o Alejandro, on the other hand, sought a reconsideration of the said request pointing out
petitioners alleged mishandling of his account due to its failure to carry out his instruction to
close his account as early as April 1997 when the prevailing rate of exchange of the US dollar
to yen was JPY127 (loans were made in yen)
-

PCIB prayed for a writ of preliminary attachment which was granted by the TC. On the same date,
the bank deposits of Alejandro in RCBC were garnished.
o Alleged that Alejandro fraudulently withdrew his unassigned deposits and that he is not a
resident of the PH
o PCIB posted an 18M bond.

Subsequently, Alejandro filed a motion to quash the writ of contending that the withdrawal of his
unassigned deposits was not fraudulent as it was approved by PCIB. He also said that they knew
that his permanent residence is in QC, and his office address is in Romulo Mabanta law office in
Makati.
o He added that he is a managing partner of the HK branch of the said law firm and that his stay
in HK is only temporary and he frequently travels back to the PH

TC then issued an order quashing the writ and holding that the withdrawal of respondents
unassigned deposits was not intended to defraud PCIB.

Meanwhile, Alejandro filed a claim for damages in the amount of 25M on the attachment bond on
the account of the wrongful garnishment of his deposits
o Presented evidence that the attorneys fees in the amount of 150k was dishonored because of
the garnishment of his deposits.
o Also testified that he graduated from Ateneo with a double degree in Economics and
Management Engineering and UP Law.
o Also presented witnesses to the effect that he is a well-known lawyer in the business
community both in the Philippines and HK.
o PCIB presented the lone witness who claimed that they acted in GF in claiming that he is a
resident of JK

RTC: granted Alejandros claim for damages arising from petitioner PCIBs invalid garnishment of
the said account.
o Awarded damages of 25M without specifying the basis thereof.
o Considering that the bond is insufficient to fully satisfy the award, then ordered to pay
additional 6M.

CA affirmed the TC but modified the award of damages. 25M damages deleted.
o 2M as nominal damages
o 5M as moral damages
o 1M as attorneys fees
o MfR granted and awarded additional 5M as exemplary damages.

ISSUE/HELD: WON the bank is liable for damages for the improper issuance of a writ of attachment

RATIO:
- Notwithstanding the final and executor judgment of the lower courts as to the misrepresentation

and suppression of facts, PCIB contends that it had acted in good faith.
o Contends that even if respondent is considered a resident of the Ph, attachment is still proper
under Sec. 1, par(f), Rule 57 of the ROC which says that since he is a temporary resident,
then service of summons may be effected by publication.
o SC finds that the contention is without merit because the lower court found them to have acted
in bad faith by resorting to the deliberate strategy to mislead the court because they
transacted with him through his permanent residence in the PH, showing that they knew that
he lives here.
o The second ground of attachment of the properties is missing because the withdrawal was not
intended to defraud the creditors because it was not part of the peso deposits assigned to
secure the loan. Hence, they resorted to the misrepresentation that he was residing out of the
Ph.
-

Where defendant is a resident of the Philippines, attachment of his/her property in an action in

instead use substituted service whereby service of summons may be effected by leaving copies of
the summons at the defendants residence with some person of suitable discretion or leaving
copies at the defendants office or regular place of business.

In the instant case, it must be stressed that the TC issued the writ mainly on the representation
that he is not a resident of the Philippines.
o Obviously, the writ was for the sole purpose of acquiring jurisdiction to hear and decide the
case.
o Had the allegations in the complaint disclosed that he has a residence in QC and office in
Makati, then the TC, in acquiring jurisdiction, should have served substituted service on the
same address.
o Misrepresentation that he does not live in the PH was thus a deliberate move to ensure that
the application for the writ will be granted.

On Damages
- Actual damages: CA was correct in not awarding the same because respondent failed to establish
the amount garnished by pet.
o Well settled that the one who has been injured by a wrongful attachment can recover damages
for the actual loss resulting therefrom.
-

Nominal damages: May be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the
plaintiff for any loss suffered by him.
o Award of nominal damages is proper in this case, considering that his right to use his money
has been violated by its garnishment.
o Amount of nominal damages may be reduced from 2M to 50k considering the short period of
two months as well as the lack of evidence on the amount garnished.

Attorneys fees: proper when a party is compelled to litigate/incur expenses to lift a wrongfully
issued attachment
o Basis of the award is the amount garnished and the length of time respondents have been
deprived of the use of their money by reason of the wrongful attachment
o May also be based upon:

(1) the amount and the character of the services rendered;

(2) the labor, time and trouble involved;
(3) the nature and importance of the litigation and business in which the services were rendered;
(4) the responsibility imposed;
(5) the amount of money and the value of the property affected by the controversy or involved in the
employment
(6) the skill and the experience called for in the performance of the services;
(7) the professional character and the social standing of the attorney;
(8) the results secured, it being a recognized rule that an attorney may properly charge a much larger
fee when it is contingent than when it is not
- Considering the short period of time it took to have the writ lifted, the favorable decisions of the
court below, the absence of evidence as to the professional character and social standing of the
attorney handling the case and the amount garnished, the award of attorneys fees should be fixed
not at 1M but only at 200k.
-

On Moral Damages award

Prudential Bank vs Tupasi-Valenzuela

Facts: Herein private respondent deposited in her Prudential Bank savings account Check No. 666B
the amount of P35,271.60 which would make her account accumulate total deposits of P36,770.4.
Private respondent issued Prudential Bank Check No. 983395 in the amount of P11,500.00 postdated June 20, 1988, in favor of one Belen Legaspi. It was issued to Legaspi as payment for jewelry
which private respondent had purchased. Legaspi, who was in jewelry trade, endorsed the check to
one Philip Lhuillier, a businessman also in the jewelry business. When Lhuillier deposited the check in
his account with the PCIB, Pasay Branch, it was dishonored for being drawn against insufficient
funds. PR was informed.
She asked why her check was dishonored when there were sufficient funds in her account as
reflected in her passbook. She wasnt given a clear answer. Later, it was found out that check 666B in
the amount of P35,271.60 deposited by private respondent on June 1, 1988, was credited in her
savings account only on June 24, 1988, or after a period of 23 days. Thus the P11,500.00 check postdated June 20 was redeposited by Lhuillier on June 24, 1988, and properly cleared on June 27, 1988.
Since this was not the first incident private respondent had experienced with the bank, private
respondent was unmoved by the bank's apologies and she commenced the present suit for damages
RTC: complaint dismissed
CA: reversed RTC. ordering herein petitioner to pay private respondent the sum of P100,000.00 by
way of moral damages; P50,000.00 exemplary damages; P50,000.00 for attorney's fees; and to pay
the costs.
Issue: WHETHER OR NOT THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE
ABUSE OF DISCRETION WHERE EVEN IN THE ABSENCE OF EVIDENCE, AWARDED
ATTORNEY'S FEES.
MAIN DISH: The award of attorney's fees is also proper when exemplary damages are awarded and
since private respondent was compelled to engage the services of a lawyer and incurred expenses to
protect her interest. (Art. 2208 NCC)The standards in fixing attorney's fees are: (1) the amount and
the character of the services rendered; (2) labor, time and trouble involved; (3) the nature and
importance of the litigation and business in which the services were rendered; (4) the responsibility
imposed; (5) the amount of money and the value of the property affected by the controversy or

involved in the employment; (6) the skill and the experience called for in the performance of the
services; (7) the professional character and the social standing of the attorney; (8) the results
secured, it being a recognized rule that an attorney may properly charge a much larger fee when it is
contingent than when it is not. In this case, all the aforementioned weighed, and considering that the
amount involved in the controversy is only P36,770.41, the total deposit of private respondent which
was misposted by the bank, we find the award of respondent court of P50,000.00 for attorney's fees,
excessive and reduce the same to P30,000.00.
SIDE DISH: Moral damages: Bank is under obligation to treat the accounts of its depositors with
meticulous care whether such account consists only of a few hundred pesos or of millions of pesos.
Responsibility arising from negligence in the performance of every kind of obligation is demandable.
While petitioner's negligence in this case may not have been attended with malice and bad faith,
nevertheless, it caused serious anxiety, embarrassment and humiliation". Hence we ruled that the
offended party in said case was entitled to recover reasonable moral damages. P100,000 is
reasonable considering the reputation and social standing of private respondent.
Exemplary damages: The law allows the grant of exemplary damages by way of example for the
public good.The public relies on the banks' sworn profession of diligence and meticulousness in
giving irreproachable service. Reduced to P20,000.
Iii. Interest
Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per
annum. (1108)
Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach
of contract.
Art. 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be
adjudicated in the discretion of the court.
Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the
obligation may be silent upon this point. (1109a)
Art. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the
demand can be established with reasonably certainty.
BSP-MB Circular No. 799 (2013)
Section 1. The Rate of interest for the loan or forebearance of any money, goods or credit and the
rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be
six percent (6%) per annum
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3, and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on July 1, 2013
PACITA F. REFORMINA and HEIRS OF FRANCISCO REFORMINA, vs. THE HONORABLE
VALERIANO P. TOMOL, JR., as Judge of the Court of First Instance, Branch XI, CEBU CITY,
SHELL REFINING COMPANY (PHILS.), INC., and MICHAEL, INCORPORATED
FACTS:
On June 7, 1972, judgment was rendered by the CFI Cebu in favor of the petitioners herein and
against respondent Shell Refining Company and Michael Incorporated. The Court ordered

respondents to pay jointly and severally the petitioners in the sum of P131,084.00 which is the value
of the boat F B Pacita Ill together with its accessories, fishing gear and equipment minus P80,000.00
which is the value of the insurance recovered and the amount of P10,000.00 a month as the
estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are
actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the
filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants
and third party plaintiffs.
The Court of Appeals modified the judgment by awarding compensatory and moral damages of
100,000 pesos with legal interests from the filing of the complaint and 41,000 pesos for the value of
the lost boat with legal interest from the filing of the complaint until fully paid.
The said decision became final and the case was remanded to the lower court for execution.
Petitioners claim that the "legal interest" should be at the rate of twelve (12%) percent per annum,
invoking in support of their aforesaid submission, Central Bank of the Philippines Circular No. 416
which states that the rate of interest for the loan or forbearance of any money, goods, or credits and
the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be
twelve (12%) per cent per annum.
Upon the other hand, private respondents insist that said legal interest should be at the rate of six
(6%) percent per annum, in accordance with Article 2209 of the New Civil Code in relation to Articles
2210 and 2211 thereof.
ISSUE: Whether or not the present case falls within the judgments mentioned in Circular No. 416?
HELD: NO.
Central Bank Circular No. 416 which took effect on July 29, 1974 was issued and promulgated by the
Monetary Board pursuant to the authority granted to the Central Bank by P.D. No. 116, which
amended Act No. 2655, otherwise known as the Usury Law.
Acting pursuant to this grant of authority, the Monetary Board increased the rate of legal interest from
that of six (6%) percent per annum originally allowed under Section I of Act No. 2655 to twelve (12%)
percent per annum. It will be noted that Act No. 2655 (from which the present circular was based)
deals with interest on (1) loans; (2) forbearances of any money, goods, or credits; and (3) rate allowed
in judgments.
The judgments spoken of and referred to are Judgments in litigations involving loans or forbearance
of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with,
nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of
the said law for it is not within the ambit of the authority granted to the Central Bank.
The Monetary Board may not tread on forbidden grounds. It cannot rewrite other laws. That function
is vested solely with the legislative authority. It is axiomatic in legal hermeneutics that statutes should
be construed as a whole and not as a series of disconnected articles and phrases. In the absence of
a clear contrary intention, words and phrases in statutes should not be interpreted in isolation from
one another.
Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for
Damages for injury to persons and loss of property and does not involve any loan, much less
forbearances of any money, goods or credits. As correctly argued by the private respondents, the law
applicable to the said case is Article 2209 of the New Civil Code.

That being said, the legal interest applicable to the petitioners is 6%.
G.R. No. 96372 May 22, 1995 (FELICIANO, J.)
ANTONIO L. CASTELO, BERNABE B. BANSON, LOURDES A. BANSON, and POMPEYO
DEPANTE vs THE COURT OF APPEALS, 12th Division, and MILAGROS DELA ROSA
FACTS:
15 October 1982 - Ps Antonio Castelo, Bernabe Banson, Lourdes Banson and Pompeyo Depante
entered into a contract denominated as a "Deed of Conditional Sale" with PR Milagros Dela Rosa
involving a parcel of land located in 1524 Espaa Street, Sampaloc, Manila, 84.19 square meters
in area. The agreed price of the land was P269,408.00. Upon signing the contract, PR paid P
P106,000.00 leaving a balance of P163,408.00
The Deed of Conditional Sale also stipulated that: (b) The balance of P163,408.00 to be paid on or
before December 31, 1982 without interest and penalty charges; (c) Should the said balance
[remain unpaid] by the VENDEE, the VENDORS hereby agree to give the VENDEE a grace
period of SIX (6) months or up to June 30, 1983 to pay said balance provided that interest at the
rate of 12% per annum shall be charged and 1% penalty charge a month shall be imposed on the
remaining diminishing balance.
PR Dela Rosa was unable to pay the remaining balance on or before 30 June 1983.
29 July 1983 - Ps filed an action for specific performance with damages in the RTC Manila against
PR Dela Rosa. RTC rendered a decision ordering the rescission of the Deed of Conditional Sale.
Ps then went on Certiorari to the Court of Appeals questioning the trial court's decision rescinding
the Deed of Conditional Sale. They claimed that rescission of the contract was only an alternative
relief available under the Civil Code, while they, in their complaint before the RTC, had asked for
specific performance with damages.
21 Nov 1986 CA(BARTOLOME): annulled and set aside the RTC's decision (par. 2) ordering PR
to comply with her obligation under the conditional sale to pay the balance of the conditional
sale in the amount of P163,408.00, to pay interest and in default thereof the rescission thereof is
the alternative.
Ps filed a motion for execution of the judgment. PR opposed this motion.
RTC issued writ of execution. Accordingly, a Sheriff's Notice to Pay Judgment was served on PR
Dela Rosa requiring her to pay Ps a total of P197,723.68.
Ps filed a MfR and a separate motion for alias writ of execution contending that the sum of
P197,723.68, based on the Sheriff's own computation, was erroneous. They argued that the
obligation of PR was to pay (a) interest at the rate of twelve percent (12%) per annum plus (b)one
percent (1%) penalty charge per month, from default, i.e. from 1 January 1983:
a. That the amount to be paid by PR should be P398,814.88 instead and not P197,723.68 or a
difference of P201,091.20; (detailed computation in case)
Ps also claimed that the amount arrived at by the Sheriff was inconsistent not only with the CAs,
but also the stipulations in the "Deed of Conditional Sale."
RTC denied the motion for alias writ of execution and MfR. RTC stated that it did not have
authority to enlarge the scope of the dispositive portion of the CAs decision which was the subject
of execution. Moreover, the phrase "to pay interest" found in the dispositive portion of the CAs
decision did not refer to the stipulation in the "Deed of Conditional Sale" but rather to the legal rate
of interest imposed by CA which started to run from 12 February 1987, the date of entry of
judgment. Had it intended otherwise, CA would have declared so.
P moved for reconsideration of the Order, without success. Ps then went on Certiorari for the
second time to CA claiming that RTC had acted with grave abuse of discretion in issuing its
Orders. The petition was dismissed for lack of merit.
CA (LUNA): Indeed, what must be the subject of execution is the new decision of the CA wherein
decreed in paragraph "2" of the dispositive portion, ordering the "defendant . . . to pay the balance

of the conditional sale in the amount of P163,408.00, to pay interest . . . . " Being a "new"
judgment or decision, the computation of the "interest" on the balance of the conditional sale
should commence from the date of its ENTRY on February 12, 1987, when the decision became
FINAL and EXECUTORY. It is the DECISION of this Court WHICH DECREED PAYMENT and
ACCRUAL OF INTEREST.
Hence this Petition for Review contending that, CA had erred in ignoring the stipulation for
payment of interest in case of default found in the "Deed of Conditional Sale."

ISSUE/HELD: What is the correct interpretation of the phrase "to pay interest" set out in the
dispositive portion of the 21 November 1986 decision of Castro-Bartolome, J.?
WON there is an ambiguity or clerical error and inadvertent omission in the dispositive portion of the
decision of Castro-Bartolome, J. dated 21 November 1986, which may legitimately be clarified by
referring to the body of the decision and perhaps even the pleadings filed before her. ErrNO. not in
body.
under the circumstances which were before Castro-Bartolome, J., what should PR dela Rosa have
been held liable for in accordance with law?
SC: must refer to the interest stipulated by the parties in the Deed of Conditional Sale which they had
entered into on 15 October 1982
RATIO: The established doctrine is that when the dispositive portion of a judgment, which has
become final and executory, contains a clerical error or an ambiguity arising from an inadvertent
omission, such error or ambiguity may be clarified by reference to the body of the decision itself.
[APPLICATION IN CASE] The dispositive portion itself failed to specify expressly whether CastroBartolome, J. was referring to the payment of interest in accordance with the terms and conditions of
the "Deed of Conditional Sale" or whether, as CA was to hold almost four (4) years later that the
requirement of "to pay interest" related, not to the interest provisions of the Conditional Sale Deed
between Ps and PR, but rather to legal interest on the amount of the unpaid balance of the purchase
price of the land which would begin to accrue from the date of the entry of the Castro-Bartolome
judgment on 12 February 1987.
It thus appears that the Castro-Bartolome decision was ambiguous in the sense that it was too
cryptic. Examination of the body of that decision, however, sheds no light on the reference intended
by Castro-Bartolome, J. in directing private respondent "to pay interest." Luna, J. (CA ponente)
himself had to resort to "fair interpretation." We believe that, in these circumstances, we must assume
that Mme. Justice Castro-Bartolome meant to decide in accordance with law; that we cannot fairly
assume that she was unfamiliar with the applicable law or that she had intended to grant Ps less than
that they were entitled to under the law. Thus, the important question is: under the circumstances
which were before Castro-Bartolome, J., what should PR dela Rosa have been held liable for in
accordance with law? We believe and so hold that the phrase "to pay interest," found in the
dispositive portion of the Castro-Bartolome decision must, under applicable law, refer to the interest
stipulated by the parties in the Deed of Conditional Sale which they had entered into on 15 October
1982. We note, in the first place, that the phrase "to pay interest" comes close upon the heels of the
preceding phrase "to comply with her obligation under the conditional sale to pay the balance of
P163,408.00." A strong inference thus arises that the "interest" required to be paid is the interest
stipulated as part of the "obligation [of private respondent dela Rosa] under the conditional sale
[agreement] to pay the balance of [the purchase price of the land]." There is, in the second place, no
question that PR dela Rosa had failed to pay the balance of P163,408.00 on or before 31 December
1982. The applicable law is to be found in Article 2209 of the Civil Code3.Under Article 2209, the
3

If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the

appropriate measure for damages in case of delay in discharging an obligation consisting of the
payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract
of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of
additional interest at a rate equal to the regular or monetary interest, becomes due and payable.
Finally, if no regular interest had been agreed upon by the contracting parties, then the damages
payable will consist of payment of legal interest 10 which is six percent (6%) or, in the case of loans or
forbearances of money, twelve percent (12%) per annum. Applying Article 2209 to the instant case,
we must refer to the "Deed of Conditional Sale" which, as already noted, had specifically provided for
"interest at the rate of 12% per annum" and a "1% penalty charge a month [to] be imposed on their
remaining diminishing balance."
PR contends that Article 2209 of the Civil Code is not applicable in this case because the interest
referred to therein is given as compensation for the use of money, not for the incurring of delay as in
the
concept of damages arising from delay in the discharge of obligations consisting of the payment of a
sum of money. The "obligation consisting in the payment of a sum of money" referred to in Article
2209 is not confined to a loan or forbearance of money. The Court has, for instance, consistently
applied Article 2209 in the determination of the interest properly payable where there was default in
the payment of the price or consideration under a contract of sale as in the case at bar. Article 2209
has also been applied by this Court in cases involving an action for damages for injury to persons and
loss of property; to actions for damages arising from unpaid insurance claims; and an action involving
the appropriate rate of interest on just compensation that is payable for expropriated lands.
The stipulation in the "Deed of Conditional Sale" requiring the payment of interest is not unlawful. The
validity of the contract of conditional sale itself has not been put to question by PR dela Rosa and
there is nothing in the record to suggest that the same may be contrary to law, morals, good custom,
public order or public policy. Accordingly, the contractual stipulation must be regarded as binding and
enforceable as the law between the parties.
EASTERN ASSURANCE AND SURETY CORPORATION vs CA
G.R. No. 127135 | January 18, 2000 | J. Mendoza
FACTS: On April 9, 1981, Vicente Tan insured his building in Dumaguete City against fire with
Eastern Assurance and Surety Corporation (EASCO) for P250,000.00. On June 26, 1981, the
building was destroyed by fire. As his claim for indemnity was refused, Tan filed a complaint for
breach of contract with damages against EASCO.
The RTC ruled in favor of Tan and ordered EASCO to pay P250,000.00 representing the fire
insurance claim of plaintiff plus legal rate of interest from June 26, 1981 until fully paid as well as
attorneys fees, exemplary damages and insurance claim expenses. The CA affirmed but deleted the
exemplary damages and attorneys fees. This decision became final on August 5, 1993.
Thereupon, EASCO tendered payment of the money judgment in the amount of P250,000.00 plus
interest of 6% per annum from June 26, 1981 to July 30, 1993. However, Tan refused to accept
payment on the ground that the applicable legal rate of interest was 12% per annum. Subsequently,
EASCO brought the matter to the Insurance Commission. On February 27, 1995, the parties agreed
before the hearing officer of the commission that the interest should be computed from June 26, 1981
to September 30, 1994. EASCO would file with the trial court a motion to fix the legal rate of interest
attaching thereto a check in the amount of P250,000.00 with 6% interest per annum.
Accordingly, on March 17, 1995, EASCO filed the motion in court, together with a managers check
for P448,750.00. The RTC then ruled that the applicable interest rate is 12% for the period stipulated
contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest which is six percent (6%) per annum.

and the amount of the managers check would be in partial satisfaction of the obligation.
The CA modified the ruling as follows: 6% from June 26, 1981 to August 24, 1993 (for breach of
contract) and 12% beginning August 25, 1993 until the money judgment is paid.
ISSUE:
WON the legal interest set by the CA was correct
Yes except the part which says until the money judgment is paid should be changed to
September 30, 1994 because it was the agreed cut-off date
HELD: When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts, is breached, the contravenor can be held liable for damages. The provisions under Title
XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
Rules on Rate of Interest from the summary provided in Eastern Shipping Lines vs CA:
1. When the obligation is breached, and it consists in the payment of a sum of money, the interest
due should be that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to be computed from default (Art. 1169
NCC).
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.
EASCO also argues that the parties agreed on the "cut-off date" for the payment of legal interest, and
that is from June 26, 1981 to September 30, 1984, which the Court of Appeals should have
O. The resolution of May 10, 1995
of the trial court referred to such an agreement, and Tan never questioned this resolution. The trial
courts finding on this point is binding. Hence, the payment of 12% legal interest per annum should
commence from August 25, 1993, the date the decision of the trial court became final, up to
September 30, 1994, the agreed "cut-off-date" for the payment of legal interest.
International Container Terminal Services, Inc. v. FGU Insurance Corporation
G.R. No. 161539 | April 24, 2009 | J. Austria-Martinez
FACTS
In a Decision dated June 27, 2008, the Court denied the petition filed in this case and found the
petitioner liable for the full amount of the shipment that was lost while in its charge. Petitioner filed
MR, which was denied by the Court.

Petitioner filed the present second motion for partial reconsideration where it solely assails the award
and reckoning date of the 12% interest imposed by the RTC on its adjudged liability.
Petitioner contends that the complaint filed before the RTC is not one for loan or forbearance
of money, but one for breach of contract or damages; hence, petitioner insists that the interest
rate should be the legal rate of 6%, and not 12%.
Petitioner also argues that the RTC reckoned the date when interest should accrue on the date
when respondent FGU Insurance Corporation paid the amount insured, or on January 3, 1995.
Petitioner contends that this is erroneous and the date should be reckoned from the time when
respondent filed the complaint with the RTC, which is on April 10, 1995.
ISSUE
WON the interest rate of petitioners liability should be 6% and reckoned from the time of the filing of
the complaint
HELD
YES.
The interest rate of 6% should have been imposed, and not 12%, as affirmed by the Court. Also, it
should have been reckoned from April 10, 1995, when respondent filed by the complaint for sum of
money, and not January 3, 1995, which was the date respondent paid the amount insured to the
Republic Asahi Glass Corporation (RAGC).
The claim in this case is one for reimbursement of the sum of money paid by FGU Insurance
Corporation to RAGC. This is not one for forbearance of money, goods or credit. Forbearance in the
context of the usury law is a contractual obligation of lender or creditor to refrain, during a given
period of time, from requiring the borrower or debtor to repay a loan or debt then due and payable.
Thus the interest rate should be as it is hereby fixed at 6%.
The interest rate of 6% shall be computed from the date of filing of the complaint (April 10, 1995).
This is in accordance with the ruling that where the demand cannot be established with reasonable
certainty, the interest shall begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
DISPOSITION
The second motion for partial reconsideration is GRANTED
The rate of interest on the principal amount of P1,875,068.88 shall be 6% per annum
computed from the date of filing of the complaint or April 10, 1995 until finality of this judgment.
From the time this Decision becomes final and executory and the judgment amount remains
unsatisfied, the same shall earn interest at the rate of 12% per annum until its satisfaction.
Ileana Macalinao vs. BPI
GR No. 175490 | Sept. 17, 2009 | J. Velasco, Jr.
Facts:
P Macalinao was a cardholder of BPI Mastercard but she defaulted in paying for some purchases
made using the credit card. On January 5, 2004, she received a letter from R BPI demanding
payment of P141,518.34.
Table 1
Statemen Previous

Purchases Penalty

Financ

Balance

t Date

Balance

(Payments) Interest

113,540.10 8,362.50
(7,000.00)
118,833.49

323.57

123,375.65

1,050.2
0
1,435.5
1

e
Charge
s
3,061.9
9
2,885.6
1
2,806.4
1
3,891.0
7
4,037.6
2
3,616.0
5
3,743.2
8
3,571.7
1
3,607.3
2
3,862.0
9
4,009.7
1
4,174.1
6

10/27/20
02
11/27/20
02
12/31/20
02
1/27/200
3
2/27/200
3
3/27/200
3
4/27/200
3
5/27/200
3
6/29/200
3
7/27/200
3
8/27/200
3
9/28/200
3
10/28/20
03
11/28/20
03
12/28/20
03
1/27/200
4

94,843.70

559.72

98,465.41 (15,000)

86,351.02 30,308.80

259.05

119,752.28

618.23

124,234.58

990.93

8,491.1
0

4,599.3
4

129,263.13 (18,000.00) 298.72

115,177.90

644.26

119,565.44 (10,000.00) 402.95

128,435.56

141,518.34

608.07

Due

154,608.
78

98,456.4
1
86,351.0
2
119,752.
28
124,234.
58
129,263.
13
115,177.
90
119,565.
44
113,540.
10
118,833.
49
123,375.
65
128,435.
56
134,045.
23

Under the Terms and Conditions Governing the Issuance and Use of the BPI Credit and BPI
Mastercard, the charges or balance thereof remaining unpaid after the payment due date indicated on
the monthly Statement of Accounts shall bear interest at the rate of 3% per month and an additional
penalty fee equivalent to another 3% per month.
For Macalinaos failure to pay, BPI filed with MeTC-Makati a complaint for a sum of money against P
and her husband. In the complaint, BPI prayed for payment of P154,608.78 (see Table 1) PLUS
3.25% finance charges, late payment charges of 6% of the amount due from February 29, 2004, 25%
of total amount due as attorneys fees, and cost of suit.
The Macalinaos failed to file their answer so MeTC ruled in favor of BPI: Macalinaos to pay:
1. Amount of P141,518.34 PLUS interest and penalty charges of 2% per month from January 5,
2004 until full payment
2. P10,000 as attorneys fees

3. Cost of suit
RTC: affirmed MeTC
CA: affirmed but modified total amount due and interest rate
1. Amount of P126,706.70 PLUS interest and penalty charges of 3% per month from January 5,
2004 until full payment
2. Same attorneys fees and cost of suit
The CA held that the amount of P141,518.34 (amount sought to be satisfied in the demand letter of
BPI) already incorporated higher interest rates in the amount; thus, it should not be the basis in
computing Ps total obligation. It held, however, that the interest rate should be 3% pursuant to the
credit card contract stipulation.
*Husband died so only Ileana is left as P.
Issue: How should Macalinaos total obligation be computed?
Held:
1) The interest rate and penalty charges of 3% per month (36% per annum) should be reduced to
2% per month (24% per annum).
BPI originally imposed the interest and penalty charges at 9.25% per month in its complaint,
but this was declared unconscionable by the lower courts for being too excessive it was
reduced to 2%. The CA, however, modified it to 3% based on the credit card terms &
conditions.
Even though the terms & conditions stipulate a 3% interest rate (36% per annum), it should be noted
that in several cases, the Court has considered a 36% per annum interest rate as excessive and
unconscionable, and thus void for being contrary to morals. The same is true with the penalty charge,
pursuant to Art. 1229.
P made partial payments to BPI as indicated in her Billing Statements (see Table 1). This
circumstance may be appreciated in determining what an unconscionable rate is. Hence, the Court
finds it equitable to reduce the interest rate to 1% monthly (from CAs 1.5%) and penalty charge to 1%
monthly as well (from CAs 1.5%) for a total of 2% per month, in line with jurisprudence and in
accordance with Art. 1229.
2) P is also asking for the cases dismissal as CAs computation was based on the amount of
P94,843.70 (see starting balance on Table 1) which was not the amount of the principal
obligation but Court held that P cannot do so as she failed to file her answer at the start (so it
was her fault) and that the dismissal would cause great injustice to BPI.
The CA correctly used the beginning balance of P94,843.70 as basis for the re-computation of the
interest as this was the 1st amount on the Statement of Account. There is no other amount on which
the re-computation could be based.
In view of the ruling of 1% monthly interest and 1% penalty charge to be applied to the beginning
balance, P is ordered to pay BPI:
1. Amount of P112,309.52 PLUS interest and penalty charges of 2% per month from January 5,
2004 until full payment
2. P10,000 as attorneys fees

3. Cost of suit
Siga-an v. Villanueva
Facts:
Alicia Villanueva filed a complaint against Sebastian Sigaan because she wants a return of her
money (the excess interest she paid). According to her, Sigaan, the comptroller of the Philippine
Navy, offered to loan money to her. She accepted because she needed capital for her office supply
business venture. She currently supplies office matl and equipment to the Phil Navy.
She agreed to the loan of P540k. Loan was not in writing and there was no stipulation as to
payment of interest. She issued a check worth P500; as partial payment. 2 months later, she issues
another check worth P200k. Sigaan (who now received P700k from Villanueva) said the excess
money Villanueva paid would be applied as interest. But Sigaan still kept pestering her for additional
interest and threatened to block her transactions with the Phil Navy if she wont comply. Fearing this,
she paid additional amounts totalling to P1.2m. She asked for a receipt but was told that there was no
need because they had mutual trust and confidence.
She then consulted a lawyer who told her that Sigaan could not validly collect interest because
there was no agreement of interest. She demands from Sigaan the return of the P660k.
According to Sigaan, however, he did not offer to loan but was instead propositioned by
Villanueva and insists that there was no overpayment, as that there was a promissory note by
Villanueva admitting to having borrowed P1.24m. As payment, Villanueva issued 6 postdated checks.
Only 1 was honoured. He filed criminal cases against Villanueva (BP 22). In this BP 22 case, Sigaan
claims that Villanueva, in her testimony, admitted to having agreed to a 7% interest. This should be an
exception (to the rule that interests should be in writing) because it would be unfair since Villanueva
already admits to the interest. He also claims that Villanueva was already estopped from complaining
because she was given several times to settle her obligation but failed.
Issue:
WON interest should be paid by Villanueva - NO
Held:
There are two kinds of interest, monetary and compensatory. Monetary interest is a
compensation fixed by the parties for the use or forbearance of money, while compensatory interest is
imposed by law or by courts as penalty or indemnity. Said right to interest arises only by contract or
by virtue of damages for delay or failure to pay the principal loan.
Article 1956 refers to monetary interest and mandates that no interest shall be due unless
stipulated in writing. So, it is allowed only if there was express stipulation for interest payment and if
the agreement was in writing.mIn this case, the parties did not agree. As explained by Villanueva, the
presented promissory note was in her handwriting because Sigaan told her to copy it and she did
because she feared the threats of Sigaan to block her deals with the Phil Navy. Clearly, there was no
consent to the payment of interest, as she was coerced.
Sigaans claims that Villanueva admitting to the interest should be an exception. However there
are only 2 instances where interest may be imposed in absence of stipulation. Article 2209, if the
obligation consists in payment of sum of money and debtor incurs delay, and Article 2212, where
interest due shall earn legal interest from the time it is judicially demanded. Under these 2 instances
interest may be imposed only as penalty or damages for breach of contractual obligations. These are

only applicable to compensatory interests and not monetary. And in this case there was no proof that
Villanueva defaulted in paying the loan.
It was duly established that respondent paid interest to petitioner. Respondent was under no
duty to make such payment because there was no express stipulation in writing to that effect. There
was no binding relation between petitioner and respondent as regards the payment of interest. The
payment was clearly a mistake. Since petitioner received something when there was no right to
demand it, he has an obligation to return it, as the principle of solutio indebiti applies.
The court held in Eastern Shipping Lines, Inc. v. Court of Appeals, that when an obligation, not
constituting a loan or forbearance of money is breached, an interest on the amount of damages
awarded may be imposed at the rate of 6% per annum. They further declared that when the judgment
of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether
it is a loan/forbearance of money or not, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed equivalent to a forbearance of credit.
In the present case, petitioners obligation arose from a quasi-contract of solutio indebiti and
not from a loan or forbearance of money. Thus, an interest of 6% per annum should be imposed on
the amount to be refunded as well as on the damages awarded and on the attorneys fees, to be
computed from the time of the extra-judicial demand on 3 March 1998, up to the finality of this
Decision. In addition, the interest shall become 12% per annum from the finality of this Decision up to
its satisfaction.
Nacar v. Gallery Frames
(This is actually a labor case but important for application of interest)
IMPORTANT NOTE REGARDING APPLICABLE INTEREST
Central Bank Circular 416 imposing a 12% per annum interest rate on all loans or forbearances of
money, goods, or credit, and 6% per annum interest rate on all other obligations applies in the cases
below. However, effective 1 July 2013, BSP Monetary Bank Circular No. 799-2013 was issued,
providing that the legal interest for loans or forbearances of money shall be 6%, thereby creating the
6-6-6 rule. This was applied in Nacar v. Gallery Frames (G.R. No. 189871; 13 August 2013).
6-12-6 (Eastern Assurance
three-step rule)
1. When the obligation is breached, and it
consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due
should be that which may have been stipulated in
writing.
Furthermore, the interest due shall itself earn
legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be
computed from default, i.e., from judicial or
extrajudicial demand under and subject to the
provisions of Art. 1169 of the Civil Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be
imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be

6-6-6 (Nacar rules, applying

new Circular 799-2013)
1. When the obligation is breached, and it
consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due
should be that which may have been stipulated in
writing.
Furthermore, the interest due shall itself earn
legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate
of interest shall be 6% per annum to be computed
from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of
Art. 1169 of the Civil Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be
imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be

adjudged on unliquidated claims or damages

except when or until the demand can be
established with reasonable certainty.
Accordingly, where the demand is established
with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially
orextrajudicially (Art. 1169) but when such
certainty cannot be so reasonably established at
the time the demand is made, the interest shall
begin to run only from the date the judgment of
the court is made (at which time the quantification
of damages
may be deemed to have been reasonably
ascertained). The actual base for the computation
of legal interest shall, in any case, be on the
amount finally adjudged.
3. When the judgment of the court awarding a
sum of money becomes final and executory, the
rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction,
this interim period being deemed to be by then an
equivalent to a forbearance of credit.

adjudged on unliquidated claims or damages,

except when or until the demand can be
established with reasonable certainty.
Accordingly, where the demand is established
with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially or
extrajudicially (Art. 1169), but when such certainty
cannot be so reasonably established at
the time the demand is made, the interest shall
begin to run only from the date the judgment of
the court is made (at which time the quantification
of damages
may be deemed to have been reasonably
ascertained). The actual base for the computation
of legal interest shall, in any case, be on the
amount finally adjudged.
3. When the judgment of the court awarding a
sum of money becomes final and executory, the
rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6%
per annum from such finality until its satisfaction,
this interim period being deemed to be by then an
equivalent to a forbearance of credit.

FACTS: Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr. Nacar
alleged that he was dismissed without cause by Gallery Frames on January 24, 1997.
On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of illegal dismissal hence the
Arbiter awarded Nacar P158,919.92 in damages consisting of backwages and separation pay.
Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court affirmed the
decision of the Labor Arbiter and the decision became final on May 27, 2002.
After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as he
alleged that his backwages should be computed from the time of his illegal dismissal (January 24,
1997) until the finality of the SC decision (May 27, 2002) with interest.
The LA denied the motion as he ruled that the reckoning point of the computation should only be from
the time Nacar was illegally dismissed (January 24, 1997) until the decision of the LA (October 15,
1998). The LA reasoned that the said date should be the reckoning point because Nacar did not
appeal hence as to him, that decision became final and executory.
ISSUE: Whether or not the Labor Arbiter is correct.
HELD: No. There are two parts of a decision when it comes to illegal dismissal cases (referring to
cases where the dismissed employee wins, or loses but wins on appeal). The first part is the ruling
that the employee was illegally dismissed. This is immediately final even if the employer appeals
but will be reversed if employer wins on appeal. The second part is the ruling on the award of
backwages and/or separation pay. For backwages, it will be computed from the date of illegal
dismissal until the date of the decision of the Labor Arbiter. But if the employer appeals, then the end
date shall be extended until the day when the appellate courts decision shall become final. Hence, as
a consequence, the liability of the employer, if he loses on appeal, will increase this is just but a risk
that the employer cannot avoid when it continued to seek recourses against the Labor Arbiters

decision. This is also in accordance with Article 279 of the Labor Code.
Anent the issue of award interest in the form of actual or compensatory damages, the Supreme Court
ruled that the old case of Eastern Shipping Lines vs CA is already modified by the promulgation of the
Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate of
interest from 12% to 6%. Specifically, the rules on interest are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
b. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon judicial
demand whichever is appropriate and subject to the provisions of Article 1169 of the Civil Code)
b.2. rate of interest shall be 6% per annum
2. Non-Monetary Obligations (such as the case at bar)
a. If already liquidated, rate of interest shall be 6% per annum, demandable from date of judicial or
extra-judicial
demand (Art. 1169, Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty. Interest shall still be 6% per annum demandable
from the date of judgment because such on such date, it is already deemed that the amount of
damages is already ascertained.
3. Compounded Interest
- This is applicable to both monetary and non-monetary obligations
6% per annum computed against award of damages (interest) granted by the court. To be
computed from the date when the courts decision becomes final and executory until the award
is fully satisfied by the losing party.
4. The 6% per annum rate of legal interest shall be applied prospectively:
- Final and executory judgments awarding damages prior to July 1, 2013 shall apply the 12% rate;
Final and executory judgments awarding damages on or after July 1, 2013 shall apply the 12%
rate for unpaid obligations until June 30, 2013; unpaid obligations with respect to said
judgments on or after July 1, 2013 shall still incur the 6% rate.
HERMOJINA ESTORES vs. SPOUSES ARTURO AND LAURA SUPANGAN
G.R. No. 175139 April 18, 2012
DOCTRINE: The general rule is that the applicable rate of interest shall be computed in accordance
with the stipulation of the parties. Absent any stipulation, the applicable rate of interest shall be 12%
per annum when the obligation arises out of a loan or a forbearance of money, goods or credits. In
other cases, it shall be six percent (6%).
A forbearance of money, goods or credits refers to arrangements other than loan agreements, where
a person acquiesces to the temporary use of his money, goods or credits pending happening of
certain events or fulfillment of certain conditions.
Petitioners: Hermojina Estores
Respondents: Spouses Arturo and Laura Supangan

FACTS: On October 3, 1993, Hermojina and spouses Arturo and Laura entered into a Conditional
Deed of Sale, whereby Hermojina offered to sell, and the spouses Supangan offered to buy, a parcel
of land covered by TCT No. 98720 located at Naic, Cavite for 4.7 million. The parties also stipulated
other conditions such as the right to demand return of full amount of downpayment by the vendor
Hermojina if she fails to complete the necessary documentation and clearances with DAR and the
Land Registration Commission (LRC) and other needed to register the title to the spouses Supangan.
Despite the passage of almost seven years from the time of the execution of the contract, and
notwithstanding payment of 3.5 million on the part of the spouses Supangan, Hermojina still failed to
comply with her obligations, including the obligation to complete the necessary paperwork to register
the title to the Supangans. Hence, in a letter dated September 27, 2000, the spouses demanded the
return of the amount of 3.5 million within 15 days from receipt of the letter. Hermojina acknowledge
the receipt of the money and promised to return the same within 120 days. The Supangans were
amenable to the proposal and provided for 12% interest to be compounded annually.
Due to the failure of Hermojina to return the amount despite demand, the spouses filed a complaint in
the RTC Malabon against Hermojina and her alleged agent, Roberto Arias. In their complaint, the
spouses prayed for the principal amount of 3.5 million, plus 12% interest compounded annually
starting October 1993 (reaching the amount of 8.56 million), plus moral, actual and exemplary
damages, attorneys fees (plus 20% of the recoverable amount to be added to the attorneys fees)
and costs of suit.
In their Answer, Hermojina claimed that they were willing to return the 3.5 million but without any
interest, as (according to them) the interest was not agreed upon. Subsequently, in their Pre-Trial
Brief, they reiterated that the only remaining issue between the parties is the imposition of interest.
They argued that since the Conditional Deed of Sale provided only for the return of the downpayment
in case of breach, they cannot be held liable to pay legal interest as well.
RTC (Pre-Trial Order): parties agreed that the principal amount of 3.5 million should be returned to
the Supangans. The issue remaining is whether the Supangans are entitled to legal interest thereon,
damages and attorneys fees.
Trial ensued, however Hermojina and Roberto were not able to appear despite several
postponements, and consequently the case was automatically submitted for decision.
RTC ruling: the Supangans were entitled to interest but only at the rate of 6% per annum and not 12%
as prayed by them. It also found the Supangans entitled to attorneys fees as they were compelled to
litigate to protect their interest.
CA: affirmed the RTCs ruling. 6% interest proper, and if the adjudged principal and the interest (or
any part thereof) remain unpaid thereafter, the interest rate shall be adjusted to twelve percent (12%)
per annum. Attorneys fees were reduced to 100,000.00 as 50,000.00 plus 20% recoverable
amount was found to be excessive.
ISSUES: WON the imposition of interest and attorneys fees is proper.
HELD: YES. CA affirmed. Rate of interest shall be twelve percent (12%) per annum, computed from
September 27, 2000 until fully satisfied. However, attorneys fees is further reduced to 50,000.00.
RATIO: The Court held that it is proper to impose interest notwithstanding the absence of stipulation
in the contract. Art. 2210 of the New Civil Code expressly provides that interest may, in the
discretion of the court, be allowed upon damages awarded for breach of contract.

In the case of Hermojina, there is no question that she is legally obligated to return the 3.5 million
because of her failure to fulfill the obligation under the Conditional Deed of Sale, despite demand.
She has in fact admitted that the conditions were not fulfilled and that she was willing to return the full
amount but has not actually done so. She already enjoyed the use of the money from the time it was
given to her until now. Thus, she is already in default of her obligation from the date of demand, i.e.,
on September 27, 2000.
With regard to the interest rate applicable, the general rule is that the applicable rate of interest shall
be computed in accordance with the stipulation of the parties, as per the cited case of Crismina
Garments, Inc. v. Court of Appeals. Absent any stipulation, the applicable rate of interest shall be 12%
per annum when the obligation arises out of a loan or a forbearance of money, goods or credits. In
other cases, it shall be six percent (6%). In this case, the parties did not stipulate as to the applicable
rate of interest.
The only question remaining therefore is whether the 6% (as provided under Article 2209 of the New
Civil Code), or 12% (under Central Bank Circular No. 416), shall apply.
The contract involved in this case is admittedly not a loan but a Conditional Deed of Sale. However,
the contract provides that the seller (Hermojina) must return the payment made by the buyer (the
spouses Supangan) if the conditions are not fulfilled. There is no question that they have in fact, not
been fulfilled as the seller Hermojina has admitted this. The Crismina case, however, states that a
forbearance of money, goods or credits refers to arrangements other than loan agreements, where a
person acquiesces to the temporary use of his money, goods or credits pending happening of certain
events or fulfillment of certain conditions.
In this case, the Supangans parted with their money even before the conditions were fulfilled. They
have therefore allowed or granted forbearance to the seller (Hermojina) to use their money pending
fulfillment of the conditions. They were deprived of the use of their money for the period pending
fulfillment of the conditions and when those conditions were breached, they are entitled not only to
the return of the principal amount paid, but also to compensation for the use of their money. The
compensation for the use of their money, absent any stipulation, should be the same rate of legal
interest applicable to a loan since the use or deprivation of funds is similar to a loan.
Hermojinas unwarranted withholding of the money that rightfully pertains to the spouses amounts to
forbearance of money that can be considered as an involuntary loan. Thus, the applicable rate of
interest is 12% per annum.
[SIDE NOTE]
Under Art. 2208 of the Civil Code, attorneys fees may be recovered:
xxxx
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest;
xxxx
(11)
In any other case where the court deems it just and equitable that attorneys fees and
expenses of litigation should be recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable.
Considering the circumstances of the instant case, we find that the spouses Supangan were entitled
to recover attorneys fees. There is no doubt that they were forced to litigate to protect their interest,
i.e., to recover their money. However, the Court found that the amount of 50,000.00 was more
appropriate, in line with the policy enunciated in Art. 2208 of the Civil Code that the award of
attorneys fees must always be reasonable.

PCI Leasing and Finance, Inc. vs. Trojan Metal Industries Inc. Sps. Dizon and John Doe
G.R. No. 176381 | December 15, 2010 | Carpio J.
Facts: (sale with lease agreement)
Trojan came to PCI Leasing to seek a loan. PCI Leasing offered to buy various equipment owned by
Trojan instead (hydraulic press with cushion, various powerpress, lathe machine, milling machine and
a radial drill). Trojan agreed and they executed deeds of sale for the various equipment for a total of
P2,865,070.
Trojan and PCI Leasing entered into a lease agreement later where Trojan leased from PCI leasing
the various equipment (Trojan owner turned lessee). Trojan issued post dated checks (24 month
instalments) for the monthly rental of the equipment.
Trojan was also required to give a guaranty deposit of P1,030,350 to be automatically forfeited should
equipment be returned before lease agreement expires. Spouses Dizon (Trojans Pres and VP)
executed a Continuing Guaranty of Lease obligations where they agreed to pay in case Trojan
defaults.
Trojan used the leased equipment as temporary collateral to obtain additional loan from another
financing company. PCI Leasing considered the second mortgage a violation of the lease agreement.
Trojans partial payments reached P1,717,091 at this time. PCI Leasing sent a demand letter to
Trojan for the payment of the outstanding obligation which Trojan did not heed.
PCI Leasing filed in the RTC a complaint against Trojan, sps Dizon and John Doe [TROJAN] for the
recovery of sum of money and personal property and for the issuance of a writ of replevin.
RTC issued the writ of replevin. PCI Leasing sold the leased equipment to a third party and collected
P1,025,000.
TROJAN: sale with lease agreement was to facilitate financial lease. The simulated financial lease
should be reformed to show the true agreement: a loan secured by chattel mortgage.
RTC: Sale and leaseback as financial lease VALID. PCI entitled to possession. TROJAN should pay
remaining rentals of P888,434.48 plus legal interest from date of filing the complaint + Atty Fees
P50,000
CA: Loan secured by chattel mortgage. PCI collected (Guaranty Deposit P1,030,000 and Proceeds
from sale of equip to 3P P1,025,000) total of P2,055,250 as against TROJANs remaining obligation
of P888,423.48 or an excess of P1,166,826.52 which should be returned to TROJAN
[ChattelMortgageLaw]
PCI Leasing filed a petition for review in the SC
Issues:
1) WON sale with lease agreement is a finance lease or a loan secured by chattel mortgage. LOAN
secured by chattel mortgage
2) WON PCI should refund the P1,166,826.52. To be recomputed. Remanded to RTC (see
discussion on interest below)
Ratio:
It was a loan secured by chattel mortgage
In a true financial leasing, whether under RA 5980 or RA 8556, a finance company purchases on
behalf of a cash-strapped lessee the equipment the latter wants to buy but, due to financial
limitations, is incapable of doing so. The finance company then leases the equipment to the lessee in

exchange for the latters periodic payment of a fixed amount of rental.

In this case, however, TROJAN already owned the subject equipment before it transacted with PCI
Therefore, the transaction between the parties in this case cannot be deemed to be in the nature of a
financial leasing as defined by law. It is simply a loan secured by various equipment owned by
TROJAN.
Upon TROJANs default, PCI was entitled to seize the mortgaged equipment, not as owner but as
creditor-mortgagee for the purpose of foreclosing the chattel mortgage. PCIs sale to a third party of
the mortgaged equipment and collection of the proceeds of the sale can be deemed in the exercise of
its right to foreclose the chattel mortgage as creditor-mortgagee.
On the amount of refund and interest
CA should have considered the proceeds from the sale to PCI.
Records show that PCI paid Trojan P2,865,070.0027 as consideration for acquiring the mortgaged
equipment. In turn, Trojan gave PCI a guaranty deposit of P1,030,350.00.28 Thus, the amount of the
principal loan was P1,834,720.00, which was the net amount actually received by Trojan.
Against the principal loan of P1,834,720.00 plus the applicable interest should be deducted loan
payments, totaling P1,717,091.00.29
However, the exact date of the sale of the mortgaged equipment, which is needed to compute the
interest on the remaining balance of the principal loan, cannot be gleaned from the facts on record.
We thus remand the case to the RTC for the computation of the total amount due from the date of
demand on 8 December 1998 until the date of sale of the mortgaged equipment to a third party, which
amount due shall be offset against the proceeds of the sale.
In the absence of stipulation, the applicable interest due on the remaining balance of the loan is the
legal rate of 12% per annum, computed from the date PCI sent a demand letter to TROJAN on 8
December 1998. No interest can be charged prior to this date because TROJAN was not yet in
default prior to 8 December 1998. The interest due shall also earn legal interest from the time it is
judicially demanded, pursuant to Article 2212 of the Civil Code.
Applying the rules in the computation of interest, the remaining balance of the principal loan subject of
the chattel mortgage must earn the legal interest of 12% per annum, which interest, as long as
unpaid, also earns legal interest of 12% per annum, computed from the filing of the complaint on 7
May 1999.
In accordance with the rules laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, we derive
the following formula for the RTCs guidance:
TOTAL AMOUNT DUE = [principal partial payments made] + [interest + interest on interest], where:
Interest = remaining balance x 12% per annum x no. of years from due date (8 December 1998 when
demand was made) until date of sale to a third party
Interest on interest = interest computed as of the filing of the complaint on 7 May 1999 x 12% x no. of
years until date of sale to a third party
From the computed total amount should be deducted P1,025,000.00 representing the proceeds of
the sale to third party already in PCIs hands. The difference represents overpayment by Trojan,
which the law requires PCI to refund to Trojan. [ChattelMortgageLaw: excess refunded to debtor]
TROJANs right to the refund accrued from the time PCI received the proceeds of the sale of the

mortgaged equipment. However, since TROJAN never made a counterclaim or demand for refund
due on the resulting overpayment after offsetting the proceeds of the sale against the remaining
balance on the principal loan plus applicable interest, no interest applies on the amount of refund due.
Nonetheless, in accord with prevailing jurisprudence, the excess amount PCI must refund to TROJAN
is subject to interest at 12% per annum from finality of this Decision until fully paid.
3. Extent or scope of actual damages
I. Contracts and Quasi-contracts
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good
faith is liable shall be those that are the natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have reasonably foreseen at the time the
obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages
which may be reasonably attributed to the non-performance of the obligation. (1107a)
Art. 2215. In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the
damages under circumstances other than the case referred to in the preceding article, as in the
following instances:
(1) That the plaintiff himself has contravened the terms of the contract;
(2) That the plaintiff has derived some benefit as a result of the contract;
(3) In cases where exemplary damages are to be awarded, that the defendant acted upon the
advice of counsel;
(4) That the loss would have resulted in any event;
(5) That since the filing of the action, the defendant has done his best to lessen the plaintiff's
loss or injury.
Jose Mendoza v Philippine Airlines, Inc.
GR No. 140553, December 7, 2011
Facts:
1948: Mendoza owner of Cita Theater in Naga, CamSur. Good businessman.
September 17-18: town fiesta, many attend because Patron Saint of Pena Francia believed to
be miraculous
August 1948 (1 month before fiesta) Mendoza contracted with LVN Pictures for him to show
Himala ng Birhen during town fiesta. He made extensive preparations, had 2k posters,
advertised in weekly general circulation, posters saying movie will be shown in Cita Theater on
September 17 and 18
September 17, 1948: LVN delivered to PAL a can containing the film. PAL issued Air Way Bill.
Can loaded on flight 113, arrived at Pili Airport after 4 PM. But the can of film was not unloaded
at Pili, it was brought back to Manila due to the fault of the employees/agents.
Mendoza went to airport and inquired about his can of film. Station master could not explain
why the film was not unloaded. Film was only located the next day then shipped to Pili Airport
on September 20.
Mendoza received it and showed the film but lost his opportunity to get a bigger profit as the
people after the fiesta had already left for their towns. Brought action against PAL for breach of
contract, Code of Commerce! Obligations of a common carrier to make prompt delivery of
goods given to it under a contract of transportation.
o Answer: Terms and conditions of Air Way Bill, The Carrier does not obligate itself to
carry the Goods by any specified aircraft or on a specified time. Said Carrier being

hereby authorized to deviate from the route of the shipment without any liability
therefor.
CFI: because of failure to exhibit the film during the town fiesta, Mendoza suffered damages or
rather failed to earn profits in the amount of P3,000.00, but finding the PAL not liable for said
damages, dismissed the complaint.
o Although PAL was not obligated to load the film on any specified plane or on any
particular day, once said can film was loaded and shipped on one of its planes to
Camarines, then it assumed the obligation to unload it at its point of destination and
deliver it to the consignee, and its unexplained failure to comply with this duty
constituted negligence. But fraud was not involved and the defendant was a debtor in
GF.
o Not because Mendoza failed to realize profits in the sum of P3,000.00 due to the
negligence of the defendant, should PAL be made to reimburse him said sum. Applying
Art. 1107 of the Civil Code which provides that losses and those foreseen, or which
might have been foreseen, at the time of constituting the obligation, and which are a
necessary consequence of the failure to perform it, inasmuch as these damages
suffered by Mendoza were not foreseen or could not have been foreseen at the time
that the defendant accepted the can of film for shipment, for the reason that neither the
shipper LVN Pictures Inc. nor the consignee Mendoza had called its attention to the
special circumstances attending the shipment and the showing of the film during the
town fiesta of Naga, Mendoza may not recover damages sought.
Issue: WoN PAL should be liable for damages
Held: No. Cause of action is based on breach of contract, not on tort. No damages because no
stipulation on date of delivery.
Uhm first Mendoza sues on breach of contract, then now on tort based on Art. 1902? Y U CHANGE
THEORY?
Mendoza says that he was never a party to the contract of transportation and was a complete
stranger to it, and that he is now suing on a tort or violation of his rights as a stranger (culpa
aquiliana). If he does not invoke the contract of carriage entered into with the defendant company,
then he would hardly have any leg to stand on. His right to prompt delivery of the can of film at the Pili
Airport stems and is derived from the contract of carriage under which contract, PAL undertook to
carry the can of film safely and to deliver it to him promptly. Take away or ignore that contract and the
obligation to carry and to deliver and the right to prompt delivery disappear. Common carriers are not
obligated by law to carry and to deliver merchandise, and persons are not vested with the right of
prompt delivery, unless such common carriers previously assume the obligation.
The contract of carriage between the LVN and PAL contains the stipulations of the delivery to
Mendoza as consignee. His demand for the delivery of the can of film to him at the Pili Airport may be
regarded as a notice of his acceptance of the stipulation of the delivery in his favor contained in the
contract of carriage, such demand being one of the fulfillment of the contract of carriage and delivery.
In this case he also made himself a party to the contract, or at least has come to court to enforce it.
His cause of action must necessarily be founded on its breach.

Finding no reversible error in the decision appealed from, the same is hereby affirmed. No
pronouncement as to costs. So ordered.
EDGARDO CARIAGA, ET AL., plaintiffs-appellants, vs. LAGUNA TAYABAS BUS COMPANY,

defendant-appellant, MANILA RAILROAD COMPANY, defendant-appellee G.R. No. L-11037

Dec. 29, 1960
FACTS: A bus of the Laguna Tayabas Bus, driven by Alfredo Moncada, left its station at Manila for
Lilio, Laguna, with Edgardo Cariaga, a 4th year medical student of UST, as one of its passengers. As
the bus reached the poblacion of Bay, Laguna, where the national highway crossed a railroad track, it
bumped against the engine of a train then passing. The first six wheels of the train were derailed and
the engine and the front part of the body of the bus was wrecked. The driver of the bus died instantly,
while many of its passengers, Edgardo among them, were severely injured. Edgardo was confined
and was unconscious during the first 35 days after the accident.
The LTB paid the sum of P16,964.45 for all the hospital, medical and miscellaneous expenses
incurred. LTB also agreed to give him a subsistence allowance of P10.00 daily during his
convalescence.
The present action was filed to recover from the LTB and the MRR Co. a total sum of P312K as
actual, compensatory, moral and exemplary damages. For Edgardos parents, the sum of P18K in the
same concepts. The LTB disclaimed liability claiming that the accident was due to the negligence the
Manila Railroad Company, for not providing a crossing bar. They thus filed the corresponding crossclaim against Manila Railroad. The Manila Railroad Company, in turn, denied liability upon the
complaint saying that it was the reckless negligence of the bus driver that caused the accident.
LC: The negligence of the bus driver caused the accident. The cross-claim against the Manila
Railroad Company is dismissed.
ISSUE: Whether or not the damages prayed for are proper
HELD: Only the decision for compensatory damages in favor of Edgardo is upheld. First, the
Supreme Court upheld LCs finding that the driver of the bus was negligent. The whistle of train was
sounded four times but the driver of the bus in question totally disregarded the warning. There being a
finding that LTB was negligent, they are liable to pay damages as follows:
1. Re: Compensatory Damages >> The Cariagas claim that the award of P10K compensatory
damages to Eduardo, and SC agrees. As a result of the injuries suffered by Edgardo, his right
forehead was fractured necessitating the removal of practically all of the right frontal lobe of his brain.
Also, because of the physical injuries suffered by Edgardo, his mentality has been so reduced that he
can no longer finish his studies as a medical student; he has become completely misfit for any kind of
work; that he can hardly walk around without someone helping him, and has to use a brace on his left
leg and feet. The impression one gathers from this evidence is that, as a result of the physical injuries
suffered by Edgardo Cariaga, he is now in a helpless condition, virtually an invalid, both physically
and mentally.
Sc also rules that the income which Edgardo Cariaga could earn if he should finish the medical
course and pass the corresponding board examinations must be deemed to be within the category of
actual damages because they could have reasonably been foreseen by the parties at the time he
boarded the bus. At that time he was already a fourth-year student in medicine in a reputable
university. While his scholastic may not be first rate, it is, nevertheless, sufficient to justify the
assumption that he could have passed the board test in due time. Upon consideration of all the facts
mentioned the compensatory damages awarded to Edgardo Cariaga should be increased to P25K.
2. Re: Moral Damages >> Edgardo Cariaga's claim for moral damages and attorney's fees was
denied by the trial court, saying: Plaintiffs' claim for moral damages cannot be granted. Article 2219 of

the Civil Code enumerates the instances when moral damages may be covered and the case under
consideration does not fall under any one of them. The present action cannot come under paragraph
2 of said article because it is not one of the quasi-delict and cannot be considered as such because of
the pre-existing contractual relation between the Laguna Tayabas Bus Company and Edgardo
Cariaga. Neither could defendant Laguna Tayabas Bus Company be held liable to pay moral
damages to Edgardo Cariaga under Article 2220 of the Civil Code on account of breach of its contract
of carriage because said defendant did not act fraudulently or in bad faith in connection therewith.
Defendant Laguna Tayabas Bus Company had exercised due diligence in the selection and
supervision of its employees like the drivers of its buses in connection with the discharge of their
duties and so it must be considered an obligor in good faith.
In view of the foregoing the sum of P2K was awarded as moral damages by the trial court has to be
eliminated.
3. Re: Damages in favor of parents not meritorious >> The claim made by the parents for actual and
compensatory damages is without merit. As held by the trial court, in so far as the LTB is concerned,
the present action is based upon a breach of contract of carriage to which said spouses were not a
party, and neither can they premise their claim upon the negligence or quasi-delict of the LTB for the
simple reason that they were not themselves injured as a result of the collision between the LTB bus
and train owned by the Manila Railroad Company.
Wherefore, modified as above indicated, the appealed judgement is hereby affirmed in all other
respects, with costs against appellant LTB.
Villa Rey Transit, Inc. v. CA (1970) Concepcion
Petitioner: Villa Rey Transit
Respondent: Trinidad Santos et al
Brief Facts: Policronio Quintos Jr., a passenger of a Villa Rey bus died in a collision between said bus
and a bullcart. Villa Rey, in a petition for certiorari, assails the computation for damages of the lower
court. The Court held that life expectancy, although not the sole element determinative of the amount
of damages, is an important factor and cannot be disregarded.
Doctrine: Life expectancy is an important element in computing the damages to be awarded.
FACTS:
March 17, 1960, Policronio Quintos Jr. was aboard an Isuzu First Class passenger bus owned and
operated by defendant and driven by Laureano Casim. The bus left Lingayen, Pangasinan for Manila.
As the bus was approaching the northern part of the Sadsaran Bridge on the national highway in
barrio Sto. Domingo in Minalin, Pampanga, its front hit the rear side of a bullcart filled with hay. The
end of the bamboo pole about 8 ft long from the cart pierced through the windshield of the bus. The
end of the pole landed on the face of Policronio, who was sitting in front of the bus, puncturing his left
eye and fracturing the bone on the left side of his face. He suffered multiple wounds and was
rendered unconscious due to severe cerebral concussion. He was brought to the provincial hospital
of Pampanga at San Fernando. However, he died on the same day due to traumatic shock brought
about by his cerebral injuries.
Respondents Trinidad, Prima an dJulita are the sisters and only surviving heirs of Policronio. They
brought action against Villa Rey Transit Inc. as the owner and operator of the said passenger bus, for
breach of contract of carriage. The action seeks to recover P63,750.00 as damages including

attorneys fees.
Petitioners defence was that the incident was brought about by a fortuitous event.
RTC: Villa Rey Transit is liable to pay damages
Mishap was not the result of a fortuitous event but due to the negligence if the driver of the defendant.
The complaint alleged a total damage of only P63,750.00 although as elsewhere shown in the
decision that the damages for wake and burial expenses, loss of income, death of the victim, and
attorneys fee reach P79,615.96
Trial court assessed the damage at P63,750.00 as it was what was prayed for
CA: affirmed
ISSUE: How is the amount of damages recoverable by private respondents to be computed?
RATIO: Determination is based mainly upon 2 factors: (1) number of years in the basis on which the
damages shall be computed (2) the rate at which the losses sustained by the respondents shalle be
fixed
The first factor was based by the trial court on the life expectancy of Policronio which was placed at
33 and 1/3 years, adopting the formula in the American Expectancy Table of Mortality or the actuarial
of Combined Experience Table of Mortality
Petitioner maintains that the trial court erred in adopting the said formula and not acting in
accordance with Alcantara v Surro in which the damages were computed on a 4 year basis, despite
the fact that the victim was 39 years old and with a lifetime expectancy of 28.90 years
The case cited is not applicable. In Alcantara, none of the parties assailed the use of the four year
basis. The only issue assailed was the non-inclusion of the bonus that the victims employer provides
its employees in the computation for damages.
The Alcantara case had not laid down any rule on the length of time to be used in the computation for
damagers, stating that the determination had no fixed basis. Much is left to the discretion of the court,
considering that there can be no uniform rule for measuring the value of human life.
Life expectancy, however, is an important factor and cannot be dismissed. No cogent reason has
been given to warrant the use of a purely arbitrary standard such as the four year rule in the case at
bar. CA did not err in basing the computation upon Policronios life expectancy
With respect to the rate at which the damages shall be computed, petitioner impugns the decision
appealed from upon the ground that the damages awarded therein will have to be paid now, whereas
most of those sought to be indemnified will be suffered years later.
This argument is offset by the fact that although the payment of the award will have to take place
upon the finality of the decision, the liability had been fized at a rate of only P2,184.00 a year which is
the annual salary of Policronio.
The lower courts did not consider Policronios potentiality and capacity to increase his income
The Court notes that determination of the damages sustained by the private respondents should

consist not in the full amount of his earnings, but the support they received or would have received.
As such, his necessary living expenses should be deducted. It has long been held that earning
capacity, as an element of damages, should be the net earning capacity of the victim to acquire
money.
All things considered, the Court is of the opinion that the determination of losses should be fixed at
P1,184 a year, deducting the victims necessary and other expenses. The loss of his sisters may
roughly be estimated at P1,000.00 a year of P33,333.33 for the 33 and 1/3 years of his life
expectancy.
The following should be added: (a) P12,000.00 pursuant to Arts. 104 and 107 of the RPC, (b)
P1,725.95 actually spent by private respondents for medical and burial expenses, (c) attorneys fees
Amount adjudged thus fixed at P49,561.28 with interest at the legal rate from December 29, 1961,
date of promulgation of the decision of the trial court.
DISPOSITIVE: Judgment AFFIRMED with modification.
G.R. No. L-54470 May 8, 1990PHILIPPINE AIRLINES, INC., petitioner, vs.
HON. COURT OF APPEALS and NATIVIDAD VDA. DE PADILLA, substituted by her legal heirs,
namely: AUGUSTO A. PADILLA, ALBERTO A. PADILLA, CRESENCIO R. ABES (representing
the deceased Isabel Padilla Abes) MIGUEL A. PADILLA and RAMON A. PADILLA, respondents.;
GRIOFACTS: This was a 30 year old case before it got decided! How sad!
On November 23, 1960, at 5:30 P.M., Starlight Flight No. 26 of the Philippine Air Lines (hereafter
PAL) took off from the Manduriao Airport in Iloilo, on its way to Manila, with 33 persons on
board, including the plane's complement. The plane did not reach its destination but crashed on
Mt. Baco, Mindoro, one hour and fifteen minutes after takeoff.
Among the fatalities was Mr. Atenean Nicanor Padilla who was a passenger on the star crossed
flight. He was 29 years old, single. His mother, Natividad A. Vda. de Padilla, was his only legal
heir. Based on the evidence presented, Nicanor Padilla finished the elementary grades in 1943,
high school in 1947, graduated the Reserve Officer's Course (Infantry Basic Course) Armed Forces of
the Philippines in 1949, and graduated with the degree of Bachelor of Literature in 1951 and the
degree of Bachelor of Laws in 1954, all in Ateneo de Manila. He was admitted by the Supreme Court
of the Philippines to practice law on January 28, 1955, and from January 1958, to the time of his
death on November 23, 1960, he was associated with the law offices of Senator Ambrosio Padilla,
brother of his father, Alberto R. Padilla. At the time of his death, he was the President and General
Manager of the Padilla Shipping Co., Inc. He was also Vice-President and Treasurer of the Allied
Overseas Trading Co., Inc. He was a member of the Board of Directors of the Junior Chamber of
Commerce (Jaycees) International and Chairman of its Committee on Governmental Affairs for the
term 1960-1961. This Committee on Governmental Affairs published a pamphlet entitled "Good
Government is our Business," for which the deceased was named "Jaycee of the Month of January
1960."
In addition to the stipulations of facts, private respondent Padilla testified that her son, Nicanor
Padilla, prior to his death, was 29 years old, single, in good health, President and General Manager of
Padilla Shipping Company at Iloilo City, and a legal assistant of the Padilla Law Office; that upon
learning of the death of her son in the plane crash, she suffered shock and mental anguish, because
her son who was still single was living with her; and that Nicanor had a life insurance of P20,000, the
proceeds of which were paid to his sister.

Anyway, as a result of her son's death, Mrs. Padilla filed a complaint against PAL, demanding
payment of P600,000 as actual and compensatory damages, plus exemplary damages and P60,000
as attorney's fees. The Trial Court ruled in favor of Mrs. Padilla and ordered PAL to pay the sum of
P477,000.00 as award for the expected income of the deceased Nicanor; P10,000.00 as moral
damages; P10,000.00 as attorney's fees; and to pay the costs.
ISSUE: Whether or not the trial court erred in computing the awarded indemnity on the basis of
the life expectancy of the late Nicanor A. Padilla rather than on the life expectancy Natividad
Padilla, and thus erred in awarding what appears to the petitioner as the excessive sum of P477,000
as indemnity for loss of earnings.
HELD: No. Computation should be based on Nics life expectancy.
The law provides:
Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
Art. 2206. The amount of damages for death caused by a crime or quasi- delict shall be at least
three thousand pesos, even though there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter; such indemnity shall in
every case be assessed and awarded by the court, unless the deceased on account
of permanent physical disability not caused by the defendant, had no earning capacity
at the time of his death;
In the case of Davila vs. PAL, 49 SCRA 497 which involved the same tragic plane crash, this Court
determined not only PALs liability for negligence or breach of contract, but also the manner of
computing the damages due the plaintiff therein which it based on the life expectancy of the
deceased, Pedro Davila, Jr. This Court held thus:
The deceased, Pedro Davila, Jr., was single and 30 years of age when he died. At that
age one's normal life expectancy is 33-1/3 years, according to the formula (2/3 x [8030]) adopted by this Court in the case of Villa Rey Transit, Inc. vs. Court of Appeals on
the basis of the American Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality. However, although the deceased was in relatively good
health, his medical history shows that he had complained of and been treated for such
ailments as backaches, chest pains and occasional feelings of tiredness. It is
reasonable to make an allowance for these circumstances and consider, for purposes of
this case, a reduction of his life expectancy to 25 years.
Following the procedure used by the Supreme Court in the case of Davila vs. PAL, 49 SCRA 497, the
trial court determined the victims gross annual income to be P23,100 based on his yearly
salaries of P18,000 from the Padilla Shipping Company and P5,100 from the Allied Overseas
Trading Corporation. Considering that he was single, the court deducted P9,200 as yearly living
expenses, resulting in a net income of P13,900 (not P15,900 as erroneously stated in the
decision). Since Nicanor Padilla was only 29 years old and in good health, the trial court
allowed him a life expectancy of 30 years. Multiplying his annual net income of P13,900 by his
life expectancy of 30 years, the product is P417,000 (not P477,000) which is the amount of death
indemnity due his mother and only forced heir (p. 58, Record on Appeal; p. 117, Rollo).